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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

Mike Handelsman
Nitin Shah
Thomas E. Pastore
Bill Boyar
Thomas E. Pastore
John Tess
Mike Handelsman
Coming Up In The August Online Hotel Business Review


Feature Focus
Food and Beverage: Investing to Keep Pace
After five harrowing years of recession and uncertain recovery, revenues in the hotel industry (including food and beverage) have finally surpassed the previous peak year of 2007. Profits are once again on the rise and are expected to advance for the foreseeable future. The consequence of this situation means that hotel operators now have the funds to invest in their food and beverage operations in order to keep pace with rapidly changing industry trends and the evolving tastes of their hotel guests. One of the most prominent recent trends is the “Locavore Movement” which relies heavily on local sources to supply products to the hotel restaurant. In addition to fresh produce, meats and herbs, some operators are engaging local craft breweries, distilleries, bakers, coffee roasters and more to enhance their food and beverage options, and to give their operation a local identity. This effort is designed to increasingly attract local patrons, as well as traveling hotel guests. Some hotels are also introducing menus that cater to both the calorie and the ingredient conscious. Gluten-free, low-cal and low-carb menu items prepared with fresh, seasonal ingredients are available to more fitness-minded guests. Another trend is placing greater emphasis on “comfort” and “street” foods which are being offered in more casual settings. The idea is to allow chefs to create their own versions of these classic recipes, with the understanding that the general public seems to be eschewing more formal dining options. Finally, because the hotel lobby is becoming the social epicenter of its operation – a space which both guests and locals can enjoy – more diverse and expanded food and beverage options are available there. The August issue of the Hotel Business Review will report on all the recent trends and challenges in the food and beverage sector, and document what some leading hotels are doing to augment this area of their business.