Do Property Characteristics or Cash Flow Drive Hotel Real Estate Value? The Answer Is Yes
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Liu, Crocker H.; Corgel, John B.
Analysts typically use two types of methods to value hotels: comparable sales and the present value of income (sometimes calculated as discounted cash flow). This report explores whether one model is superior to the other, and whether combining both models results in more precise hotel valuations. This evaluation addresses the issue of which property characteristics and income calculations are the most effective in explaining variation in the prices of hotels, how the descending influence of hotel property characteristics and income present value components determine the prices of hotels, and whether hedonic and income-based models produce similar estimates of hotel values. The findings show that using an approach based on comparable sales or one based on incomes results in similar value estimates. Beyond that, the analysis finds that combining both models does not result in more precise hotel valuations.
Cornell; hotel income; price variations; hedonic pricing models; income based model; hotel sales data
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