Hospitality Valuation Software

The first model is a Room Night Analysis Program, which quantifies the local market demand and measures the impact of new lodging supply. Using a sophisticated penetration algorithm, the relative competitiveness of each existing and proposed hotel is measured to determine the overall market dynamics. The final output consists of a 10-year occupancy projection for the subject property and its competitors. An important feature of the room night analysis program is the ability to evaluate the adverse impact on a property's occupancy from the addition of one or more new hotels to a market.

The Fixed and Variable Income and Expense Forecasting Program consists a detailed 10-year profit and loss statement utilizing the Uniform System of Accounts for Hotels. This model works for both existing and proposed hotels and incorporates a highly accurate fixed and variable forecasting routine that is easily adapted to any type of lodging facility. The program can also be used to develop annual operating budgets.

The Hotel Valuation Model takes the output from the Income and Expense Forecasting Program and converts it into an estimate of value. The discount rate is developed from the cost of debt and equity capital and the value is calculated using either a loan to value or debt coverage approach. The output proves the value by showing the calculation of the unleveraged property yield, the leveraged equity yield, the mortgage yield and the projected cash flow to equity. This cutting-edge valuation program works because it utilizes real world investor inputs rather than appraiser divined capitalization and discount rates.

Accompanying the Hospitality Valuation Software is a comprehensive User's Manual which provides a complete description of the three programs and demonstrates how programs assist in performing hotel market studies and valuations. The manual starts with a general overview of the steps involved in developing a hotel market study and valuation. It then leads the user through the specific procedures of the market study phase that focuses on the supply and demand analysis. The Room Night Analysis program, which quantifies the local hotel demand and measures the impact of new supply, produces a projection of occupancy for the subject property and its competitors. Once the subject hotel's occupancy has been estimated, the manual turns to the task of producing the detailed ten-year forecast of revenue and expense using the Fixed and Variable income and expense forecasting program. The final step demonstrates the valuation process, which employs a discounted cash flow Hotel Valuation Model. Interwoven throughout the manual is a realistically simulated case study that illustrates how Hospitality Valuation Software can be used for all type of hotel market study and valuation assignments.

HVS International, 372 Willis Avenue, Mineola, NY 11501. Tel: 516-248-8828; Fax: 516-742-3059.