RVG’s Don DiNapoli Expert in Hospitality Valuations
Determining the value of a hospitality property involves a host of variables, from projected income and the economic outlook to deferred maintenance. Appraising these properties takes a special set of skills and experience.
DonDiNapoli, MRICS, has been appraising hospitality properties for more than 15 years and has become resident expert here at RVG. Below, Don gives us some insights into the complexities of hotel appraisals.
Q: How do you like to approach a hotel appraisal?
A: We employ the three traditional valuation techniques. Generally the income approach provides the most supportable valuation and is how the typical investor values this property type. The sales comparison approach is considered a reliable approach to value, however, without having specific confirmation of sales terms including value allocations between real estate, FF&E, business value and other motivations, this approach is given secondary consideration and serves as a test of reasonableness. The cost approach also provides good support for real estate value. Finally we segregate the real property (real estate) component from FF&E and business components.
Q: What are some of the challenges and nuances of appraising hotel properties?
A: Hospitality properties are a dynamic and unique challenge due to the nature of the industry. Unlike typical income property, hotel rentals average only one to two days. So the hospitality industry is the first to indicate market changes in the economy.
This is evidenced in U.S. room demand, which tracks very closely with U.S. GDP. For 2015, GDP is anticipated to grow at 3.3 percent and room supply is projected to grow at a rate of 1.3 percent, according to Smith Travel Research (STR) and PricewaterhouseCoopers LLP. We anticipate the average U.S. hotel occupancy to have potential to grow from 64.1 percent to 65 to 66 percent for 2015.
Q: Why should people choose RVG when looking for a hotel property appraisal?
A: RVG appraisers have completed appraisal assignments for a wide variety of hospitality properties, including small economy hotels, limited service, extended stay, select service, bed & breakfasts, non-franchise boutiques, and full-service conference centers.
We have expertise in real estate valuations and studies utilized for such purposes as acquisitions, divestitures, financing, ad valorem taxes, eminent domain properties and lease analysis.
We emphasize due diligence in the completion of our valuations, not giving short shrift to the highest and best use, data verification and the consideration of the three approaches to value. We use the most up-to-date market specific data available as well as the collaboration of a large staff to produce a well-documented and fully supported valuation.
For more information about Don and the folks at RVG, contact us