Valuation &
Feasibility
Asking for the price per square metre leads nowhere with a hotel. Sarego Group values hotel real estate in Austria and its neighbouring markets, in the Alps and around the Mediterranean, and examines whether a project or an acquisition carries economically. For owners, buyers and banks that need a figure which holds.
What this is about: Service 05
What a hotel costs is measured by the result the business earns.
Value follows income. What counts is the operating result: the GOP, that is the gross operating profit before lease, depreciation and interest, and derived from it the NOI, the result after the costs attached to ownership. That figure is capitalised, that is, converted into a value with a market rate. Everything else is context. Compare only floor area and you compare shells, missing the business inside them.
A worked example: a property with 80 rooms earns 1.1 million euros of lease a year. At a capitalisation rate of 6 per cent that gives roughly 18.3 million euros, at 7 per cent roughly 15.7 million. One percentage point in the assumption, 2.6 million euros in the result. That is why our reports never carry a single figure but a range together with the assumptions that produce it. This range is the basis for the negotiation and for the conversation with the bank.
How we proceed: 01 bis 04
Market and setting
Demand, season, competition, comparable properties. Benchmarks are named, not asserted. Where comparable data is missing, we say so.
Operating figures
Turnover by department, cost structure, GOP, lease cover, the investment backlog of recent years. The figures come from the accounts, not from a brochure.
Valuation
Income value from the sustainable result, comparison with transactions, plausibility check against the physical substance.
Sensitivities
Two per cent less occupancy, plus one rate step: we work through what that does to the value. The range is the result, not the exception.
For whom: Client groups
Owners facing a decision, buyers before a bid, banks before a financing and developers wanting to know whether a project adds up. Some bring a finished report with them and want it recalculated.
- First assessment before a sale, confidential and without a mandate.
- Feasibility for new build, conversion or extension.
- Second opinion on an existing valuation.
Questions: Three questions
- Why does the price per square metre not count?
- Because two properties of the same floor area can earn entirely differently. Location, season, operating structure and contract position determine the income, and the income determines the value. The price per square metre is at best a control figure at the end of the calculation. The same holds for a conversion or a new build.
- What is the difference between GOP and NOI?
- The GOP is the property's operating result before lease, insurance, taxes and depreciation. The NOI deducts from it the costs that stay with the owner. Valuation works with the NOI; comparison usually runs over the GOP, because it shows the performance of the business.
- Is this a court expert report?
- No. We deliver a commercial valuation for your decision, traceable in its assumptions and its arithmetic. Where a court-sworn expert is required, we say so and name the way there. For lending purposes we clarify with the respective bank which form it recognises.
