For hotel valuation in Thailand, users should have a clear understanding between the appraisal of real estate values together with assets used in the business operations, and the appraisal of the entire business which is also known as ‘business valuation’. This is very important since the value will be completely different which means that if the purpose of the valuation is for purchasing, it will have to be considered as a transaction directly to the Asset or Business takeover or merger indirectly.
As you know that most of the hotels are city hotels with buildings and towers while the resorts will be villas or lodges that are located in the tourist destinations outside the city which usually makes them beat hotels when it comes to area and space. The hotel is categorized as a type of property that generates revenue. Therefore, the hotel’s revenue generation capability will be considered such as vacancy rate, room rate, selling price, and actual selling price. Mostly, the main revenue channels of the hotel come from rooms, foods & beverages, catering/event/conference as well as other incomes related to the property respectively. Please note that other business incomes must be filtered out in which both parties, valuers, and clients must be on the same page by having a clear agreement on whether the purpose of this appraisal is for business or property valuation in order to avoid confusion and errors.
For the reviewing method, the ‘Cost Approach’ must be used in which the factors to be taken into consideration are whether the materials and equipment used in hotel operations are the same basis as the cost approach method or not since this valuation method already includes the equipment and material for decoration. The cost approach in some cases that only consider the price of land and buildings/improvements will result in a significantly different price basis
For your information, the ‘Market Approach’ is also important and might even be a more reliable valuation method than the other 2 that are mentioned earlier. However, in order to do this, you must have information about other hotels that are categorized at the same level in order to conduct a market comparison.
The additional factors that should also be considered for the appraisal for those hotels managed by the hotel chains. Therefore, a clear understanding is required in this valuation as in the case that the employer would like to appraise the performance under the management of the hotel chain, the valuation can be made under the additional assumption that the contract of the chain has been extended continuously.
The required documents in hotel valuation are: