Zen and the Art of Hotel Valuation

Presented by Tim Wilmath, MAI

Hillsborough County, Florida

Presented for the IAAO Annual Conference

August 25, 2014

There are many hotel types

Suite Hotels

Chain Hotels

For valuation purposes, hotels are either:

Under-Performing or Failing

Exceeding Expectations!!

Operating as Expected

When a hotel is

operating as expected,

it really doesn’t

present many valuation

challenges……..

When a hotel is failing

who’s fault is it?

When a hotel far exceeds

expectations, is that all real

estate or something else?

Why do some hotels succeed while others fail?

Why do some hotels fail?

A Market &

Competence

Google Trends reflects public interest

Without a market you have no customers.

Vanderbilt Hotel - Nashville

Vanderbilt Hotel - Nashville

The Vanderbilt gets a large share of it’s revenue from “group sales”

Nashville 12MMA demand by segment as a mix of total

0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Group mix

Trans Mix

There has been a dramatic change in the mix of group sales versus transient in Nashville and the U.S. as a whole.

New and Planned Hotels in Nashville

In the face of adversity

the Vanderbilt

Hotel renovated

to stay relevant

Without competence you have failure.

Who is running this place?

A physical inspection will tell you a lot about management.

A hotel’s best friend or worst nightmare.

Pizza Party for improved TripAdvisor ranking.

Days Inn - Tampa

There is a reality TV show about turning around a failed hotel.

• A market • Competence

To really Excel, a hotel requires one more thing:

• Passion

Passion

Westin Diplomat Hotel - Ft. Lauderdale

Hotels ranked by franchise fee cost

Source: 2013 United States Hotel

Franchise Fee Guide

Hotels ranked by Sale Price Per Room

Source: Sale Prices and Brands –

Historical Trends in Hotel Sale Prices

HVS 4/14/2010

Source: New Option in Hotel Appraisals: Quantifying the Revenue Enhancement Value of Hotel Brands.

Appraisal Journal, Summer 2012. A. Scruggs Love, MAI, SRA, Bruce H. Walker, Douglas W. Sutton.

“Removing the brand name and reverting to an independent caused a drop in Revenue of about 35%”

Portofino Bay Hotel - Orlando

For Loews Hotel guests, the Express Pass is included in the room rate.

Hypothetical ADR: $300 Express Pass Cost: $89

Appropriate room rate for real estate tax assessment?

Nickelodeon Hotel - Orlando

Nickelodeon Hotel - Orlando

Nickelodeon Room Rate - $200 Physically similar hotels - $100 Which rate reflects Fee Simple Market Value?

Just like hotels…….. to succeed at work we need two main ingredients

• A market • Competence

Just like hotels…. without a market for our services we aren’t getting paid

Just like hotels…….. without competence at work we have failure

Skills that can’t earn money won’t get you very far.

Just like a hotel….. to Excel at our job requires:

• A market • Competence • Passion

What is your Highest and Best Use?

Sometimes we have to take risks to achieve passion

We often fear risk, because we fear failure.

Like losing money in the stock market

Or riding a motorcycle without a helmet

Take a Leap of Faith

Ernest Shackleton’s Imperial Trans-Antarctic Expedition

“Though no one can go back in time and make a new start, anyone can start

from now and make a brand new end“

Thank You!

Tim Wilmath, MAI Hillsborough County Property

Appraiser’s Office