Hotels and resorts are multi-faceted business operations. I recall the last time I was room guest in a hotel. In addition to utilizing lodging services, I ate in the hotel's restaurant. I relaxed at the end of a long day in the hotel's spa. I attended a convention in one of the hotel's conference rooms. As you can see, there are four distinct business operations in the above example. Of course, readers can probably sight several other additional hotel services such as laundry, hair salon, tennis courts and retail gift shops. While motels and hotels are real property assets similar to commercial properties in terms of the location of the specific asset and long economic life (usually 20 to 50 years) they differ from typical commercial properties... READ MORE

Stop anyone on the street and ask him or her to name some familiar hotels. Would you be surprised if the average person could identify three, five or more? Probably not - this is the power of brands. Just like Kleenex and Clorox, name brands for tissue and bleach, a strong hotel brand has the ability to penetrate the target market to such a degree that it becomes recognized as an enduring symbol of the market-specific service standards. This service image cultivates the loyal customer base that is the foundation of a hotel brand's future earnings capacity. The proper identification of a brand's service potential, therefore, is the first step in quantifying its value. READ MORE

At the beginning of each valuation assignment, the applicable standard of value must be specified. The standard of value is a definition of the type of value being sought, i.e., fair market value, financial value, or strategic value, to name a few. The standard of value is selected based upon the type of assignment which can vary considerably, e.g., merger/acquisition analysis, estate tax filing, or dissenting shareholder lawsuits. The standard of value then influences the choice of the appropriate valuation methods used to determine the value of a hotel or ownership interest in the hotel. Therefore, the value of a hotel can differ under various circumstances. READ MORE

You're a relatively small, privately-owned, well-managed hotel operating company. You manage for institutional owners, and have solidly built a core business. But you have limited distribution and don't control the assets you manage. You might even be concentrated geographically. You're concerned that if you don't gain control of the assets you manage and grow your portfolio, you'll have difficulty keeping your key management team. Worse yet, you're concerned that you'll lose market share, your revenues will decline and your profitability will be reduced. You risk watching the enterprise value that you worked so hard to build deteriorate. Not a pretty picture. What are your options? READ MORE

Hotel owners and operators have grown more sophisticated in crafting standards with which to project and then gauge the performance of their properties. As a result, these parties are also negotiating increasingly complex performance test provisions in operating agreements. What is a performance test? Essentially, a performance test sets objective criteria for minimally acceptable financial performance of a hotel and, ultimately, provides the hotel owner with the right to terminate the management contract if the operator fails to achieve the goal. Beyond these basic concepts, performance tests come in all shapes and sizes. A savvy hotel owner will always demand that the hotel management agreement contain some type of performance test. Most hotel operators accept, albeit grudgingly, that such performance standards come with the territory of management contracts. Operators are usually concerned with limiting the scope of the test as much as possible and with negotiating cure rights that protect them from loss of the management agreement. READ MORE