When it comes to selling, most owners ask one question first: what is my hotel worth? The honest answer is that it depends — less on square metres than on what the property delivers commercially. A hotel is rarely just real estate. It is a going concern, and that is precisely what makes valuing it more demanding than valuing an apartment or an office building.
This article explains the methods used to determine a hotel’s value, which factors move the price up or down, and why inflated price expectations regularly fail during the sale process.
Why a hotel is valued differently from a property
With a conventional property, what counts above all is the physical substance: location, floor area, condition, comparable prices in the neighbourhood. A hotel is additionally valued as a business — because the buyer acquires not just walls but a source of income. Two properties that look similar from the outside can differ considerably in value if one is well occupied and profitably run and the other is not.
The decisive question is therefore whether the property is sold with its operation (as a going concern) or without its operation (as pure real estate, for example for repositioning). Both are legitimate routes — but they lead to different values and appeal to different groups of buyers.
The three common valuation methods
In practice, three approaches are used, often in combination:
- Income capitalisation approach (multiplier method): the value is derived from the sustainably achievable earnings — usually EBITDA or, for leased properties, the annual lease income. A multiplier is applied to those earnings. How high it turns out to be depends heavily on location, contractual position and risk profile, and cannot be stated as a blanket figure.
- Asset-based approach: here what counts is the intrinsic asset value — land, building, fit-out. It is relevant above all where the property itself (for instance for a change of use) is the focus rather than the ongoing operation.
- Comparable sales approach: the value is derived from prices actually achieved in comparable transactions. In the hotel sector, however, reliable comparable data is scarce, because many deals are handled off-market and without public prices.
No method delivers the “right” number on its own. A viable price emerges where the earnings logic and the asset substance align — and where a buyer is willing to pay exactly that price.
What actually drives the value
Regardless of the method, a few factors move the price particularly strongly:
- Earning power: revenue, GOP and EBITDA over recent years — and above all how sustainable and repeatable they are.
- Location and market: a property in a sought-after city or holiday region carries a different risk profile from a location with thin demand.
- Contractual position: for leased properties, what counts is the tenant’s creditworthiness, the remaining term and the level of the lease. A solid, long-term lease agreement increases predictability — and with it the value.
- Condition and deferred investment: upcoming renovations reduce the price, because the buyer factors them in.
- Operator and brand: whether a property is unbranded, branded or tied to an established operator changes the buyer pool and the valuation.
Asset deal or share deal
Another lever is the transaction structure. In an asset deal, the individual assets — property, inventory, contracts — are sold. In a share deal, it is instead the shares in the company that holds the hotel that change hands. The two routes have different tax and legal consequences and affect what ultimately reaches the seller net. The choice of structure is therefore part of setting the price — not merely a formality afterwards.
Which option makes sense depends on the individual case and belongs in the hands of tax and legal advisers. The key point is simply this: two offers with the same headline figure can be worth very different amounts, depending on how the deal is structured.
Common mistakes in setting the price
Most inflated price expectations stem from understandable but costly errors of judgement:
- Emotional premium: one’s own history with the property feeds into the price — the market does not reward it.
- Best year as the benchmark: a single strong year is treated as the baseline instead of a sustainable average.
- Ignoring deferred investment: necessary renovations are overlooked, even though every buyer prices them in.
- Marketing too widely: if a property is advertised publicly and with a price, it quickly gives the impression of a “stale listing” — a genuine loss of value, especially in the discreet segment.
An asking price set too high often costs more in the end than it brings in: the property stays on the market too long, loses its appeal and is ultimately sold below its worth.
How NOWA arrives at a realistic price
Our job is not to name the highest conceivable figure but the achievable one. We assess earnings, the contractual situation and location soberly, measure them against what well-capitalised buyers and operators are actually paying at present, and derive a defensible range from that. The brokerage itself then runs discreetly and off-market — without a public listing and without disrupting the ongoing operation.
Frequently asked questions
How do you calculate a hotel’s sale price?
In practice, the value is usually determined via the income capitalisation approach: a multiplier is applied to the sustainably achievable earnings — EBITDA or the annual lease, depending on the case — with its level depending on location, contractual position and risk profile. The asset value and, where available, comparable transactions are also taken into account. A defensible price emerges where earnings logic, asset substance and the market’s actual willingness to pay come together.
What role does the lease agreement play in a hotel’s value?
For leased properties, the lease agreement is a central value driver: the tenant’s creditworthiness, the remaining term and the level of the lease determine how predictable and secure the income is. A solid, long-term contract with a reliable operator increases predictability and, as a rule, the achievable price.
What is the most common mistake when setting the price?
The most common mistake is an asking price set too high — often for emotional reasons or because a single best year is used as the yardstick. An excessive price means a property stays on the market too long, loses its appeal and often ends up being sold below its worth. In the discreet segment in particular, marketing too widely does further damage.
General professional context, not tax, legal or valuation advice for an individual case. The methods and factors mentioned are intended as orientation; the actual value of a hotel always depends on the specific asset, its earnings and the current market situation. Choosing the transaction structure requires tax and legal advisory support.