Hotel Valuations

Hotel Valuations

Conducting a hotel valuation and determining the value of a hotel in the African market can be a challenge, when compared to more developed hotel markets, due to:

• a lack of data;
• uncertainty about future growth;
• the inability to find comparable benchmarks; and
• the increasing competition for assets.

Original market research in key hotel markets is a crucial requirement when conducting a hotel valuation in Africa. In addition, an understanding of historical hotel transactions in the market, if available, is also critical. This is one of the biggest obstacles, as transactions on the African continent as a whole are small, when compared to more developed markets. For example, South Africa is one of the most developed hotel markets in Africa and over the last six years, an estimated total of five large transactions have occurred, versus 200+ in the United Kingdom in 2016.

Hotel valuations are required for a number of reasons, including:

• the sale of a hotel asset;
• the purchase of a hotel asset; and
• the utilisation of a hotel asset as collateral for a loan.

Hotel valuations in Africa are currently in high demand due to a number of distressed assets. Hotel markets in some key nodes are under pressure due to over-supply, a strained macro environment, currency devaluation, and developments that have been undertaken by inexperienced hotel developers. Experienced investors are in a strong position to capitalise on available opportunities in the market by acquiring good properties in strong locations at affordable prices.

HTI Consulting’s valuations team is in a strong position to assist investors and developers in determining the right price for either selling or buying a hotel asset. Our team is able to mitigate the challenges related to hotel valuations through our extensive knowledge, understanding and experience of diverse hotel markets across the continent .