Calls for agreement in valuation debate
The recent uplift in the hotel property market and an improvement in room yields across the industry are making the need to find a single methodology for valuing hotels more urgent.
But delegates at a conference in London last week heard a myriad of ways to value a hotel, each arriving at a different price-tag.
Hoteliers, valuers and investors are keen to avoid a repeat of the late 1980s, where hotels fetched higher prices than their businesses could support on the back of an inflated property market, culminating in the Queens Moat Houses crisis.
The two main bodies involved in the valuation debate, the Royal Institution of Chartered Surveyors (RICS) and the British Association of Hotel Accountants (BAHA) - each of which has published its own views on the subject - diverge significantly on the valuation principles to be used.
Nevertheless, both sides agreed it was time to "go into a darkened room" and thrash out their differences.
Independent hotel consultant James McGuffie emphasised the need for one methodology to be established as a matter of urgency. "Averaging several methods will not give satisfactory results," he said.
"It is then down to the individual valuer to apply personal judgement to the weighting - and this is the subjective area that produces the problematic variations in value."
According to Russell Kett, associate at Greene Belfield-Smith and chairman of BAHA, a significant problem in the 1980s was an ignorance by bankers and investors about what makes a hotel work.
Clive Leigh, partner at Jones Lang Wootton's hotel department, agreed banks should be more responsible about their lending. "They must come forward and ask the valuer how the figures have been arrived at," he said.
Chris Day, managing director of Christie & Co, took a more market-led approach to the issue. "Price is what someone will pay for it in today's market - and that is based on comparable values," he said. "There is no constant value in a hotel's business, you have to take into account aspects such as whether it is trading or not."
Investors are far more cautious than they once were. Eric Walters, a partner at venture capitalist Schroder Ventures, said: "We do not speculate on property values - that is not the game these days."
And Kleinwort Benson director of research Paul Slattery pointed to weaknesses in the industry which made hotels unattractive propositions for investors. He spoke of a log jam of "slum hotels" as the industry struggled to adjust itself to its new marketplace.
