We have already written several times about the evaluation of hotel units, highlighting our articles:
- Assessment of investments in hospitality;
- The brands in hospitality.
Understanding that this topic is very interesting for any real estate appraiser, we wander the network in search of more information that we could share. That is how we found the document “Understanding Hotel Valuation Techniques”, by Giuliano Gasparin.
Although it is a 2011 document, we consider it to be perfectly current. In this document, the author goes through all the hotel evaluation techniques, ending with the one that may be the one that has the greatest application and that the author designates as “Income Capitalization – DCF Approach”.
The technique presented assumes that the hotel unit is in the possession of the owner for 10 years, for each year it estimates the commercial potential of the unit and its operating result and that after 10 years it sells it. Basically, it estimates EBITDA for each year.
Then, the recurring update by “wacc”.
It is curious that this technique is in opposition to others, in which the FCFF (Free Cash Flow to the FIRM) is updated and not the EBITDA.