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  • Finance & Investment
  • Due Diligence Procedures for Hotel Appraisals

  • What is the first thing that comes to mind when you hear the phrase "business valuation"? Mathematics? Formulas perhaps? Maybe even WACC (weighted average cost of capital) for those of you with a MBA. The end product of an appraisal is often a numerical value and people sometimes perceive the process to be math intensive. Although it is true that the use of formulas and equations is essential to the valuation procedure, due diligence procedures encompass far more than mathematical models. The importance of due diligence research cannot be overlooked because of its crucial role in justifying the outcome of a valuation.

    There are many factors that directly influence the value of a subject business or hotel, and they can generally be classified under the following three main areas contributing to value: company environment, industry dynamics and economic conditions. These factors then form different aspects of due diligence research. In the following paragraphs, we will discuss the three areas of due diligence research in more detail.

    Company research encompasses several different factors, and in most cases, these have the most direct impact on a company's day-to-day operations. Some examples of company research are customer demographics, management/directorship structure, suppliers, advertising and intellectual property. ...

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Hotel Business Review Finance & Investment

Mark Tapling
Thomas E. Pastore
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Mike Handelsman
Thomas E. Pastore
Thomas E. Pastore
Coming Up In The August Online Hotel Business Review


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Feature Focus
Food & Beverage: Going Casual
According to industry tracker PKF Hospitality Research, food and beverage sales represent the second- largest source of revenue for full-service hotels behind rooms. Given its financial importance, hotel operators are constantly adapting and evolving their F&B operations in order to remain current with industry trends and to meet (and exceed) guest expectations. Recent food developments which continue to proliferate include the farm-to-table movement; customized menus for those who are vegan, vegetarian, paleo or gluten-free; the appearance of smaller dishes on tasting menus; and creatively- prepared comfort foods served in more casual settings. In fact, there is a growing emphasis in the entire industry on more casual food operations. Customers are eschewing the typical breakfast-lunch- dinner/appetizer-entrée-dessert model in favor of "fast-casual" menus and service (think Panera, Chipotle or Cosi as examples). Even better if these menus are also available throughout the property, especially in social-gathering areas like the lobby, pool or bar. Some hotels are also experimenting with "pop-up" restaurants - a temporary dining option with edgy menus and design served in unexpected locations (like rooftops or lobbies) - as a way to keep things energetic and fresh. Another trend which applies to both food and wine is the option to purchase food and beverages in multiple sizes. Some operations are giving their customers the opportunity to choose - a three ounce pour of wine or a nine-ounce pour; a six-ounce filet or a twelve-ounce - the customers decide their portion size and pay accordingly. The August issue of the Hotel Business Review will document all these trends and challenges in the food and beverage sector, and report on what some leading hotels are doing to enhance this area of their business.