Valuing a Distressed Hotel
Valuing a distressed hotel is more complicated than valuing a standard commercial building because a hotel is both real estate and an operating business. The building, land, rooms, amenities, brand, staff, management, market position, and guest experience all influence value. When a hotel is distressed, underperforming, foreclosed, or bank-owned, buyers and lenders must look beyond the asking price and study the actual risks, costs, and upside potential. The first area to review is operating performance. A buyer will want to understand occupancy, average daily rate, revenue per available room, total room revenue, food and beverage income, meeting space revenue, operating expenses, payroll, insurance, utilities, repairs, and net operating income. Distressed hotels often have incomplete or unreliable financial records, so buyers may need to compare available data with market benchmarks and competing hotels. If the hotel has been poorly managed, the current income may not reflect the pro...