Hotel & Resort Valuation
For hotel valuation in Thailand, users should clearly understand the appraisal of real estate values together with assets used in the business operations and the appraisal of the entire business, 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 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 outshine 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: 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, and other incomes related to the property, respectively. Please note that other business incomes must filter out in which both parties, valuers, and clients must be on the same page by having an explicit agreement on whether the purpose of this appraisal is for business or property valuation to avoid confusion and errors.
For the reviewing method, the ‘Cost Approach’ must be used. The factors to consider are the materials and equipment used in hotel operations are the same basis as the cost approach method 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 critical and might even be a more reliable valuation method than the other two mentioned earlier. However, to do this, you must have information about different hotels categorized at the same level to conduct a market comparison.
The additional factors should also be considered for the appraisal of those hotels managed by the hotel chains. Therefore, a clear understanding is required in this valuation as if the employer would like to appraise the performance under the hotel chain management. The valuation can be done under the additional assumption that the chain’s contract has been extended continuously.
The required documents in hotel valuation are:
- Land document of right where the hotel is located
- Hotel construction permit
- Building plan
- Plan showing the location of the building
- Hotel business license/permit
- Occupancy rate (guest/room)
- Summary of the business operation for the past 3 years
- Inspection report of secondary building ROR. 1 (for a hotel with 80 rooms or more)
- Report of the EIA (for a hotel with 80 rooms or more)
- Management contract (if applicable)