Selling beds: an end or a means?

A strong hotel concept increases guest value and property value

Hotels monitor occupancy rates, average room rates and RevPAR on a daily basis. After all, without rooms sold, there is no turnover. However, according to VDW Horecamakelaars, these factors alone do not determine the value of a hotel business. “Ultimately, guests book for the overall concept surrounding the hotel,” says Jeroen Pontenagel, Hotel Real Estate Specialist at VDW Horecamakelaars.

According to hotel estate agents, this is also changing the way hotels view profitability. An airport hotel is primarily about convenience and efficiency, whilst a resort focuses on relaxation and the quality of the stay. With boutique hotels, identity and atmosphere often play a greater role.

“With a conference hotel, it’s all about offering a complete package for business guests,” says Ingmar Bokma, director and acquisitions and property adviser at VDW Horecamakelaars. “The room remains essential, but it is no longer the only distinguishing feature.”

Operational performance determines property value

According to Bokma, hotel property differs fundamentally from many other types of property, as its value is directly linked to the quality of its operations. “Hotel property is operation-dependent property,” he says. “The hotel’s positioning, the predictability of its cash flow and the profitability of its operations have a direct impact on the value of the property.”

That is why, in his view, a high occupancy rate is by no means the whole story. Hotels can have full rooms and still lose value due to price pressure, dependence on OTAs or a lack of differentiation. At the same time, Bokma also sees hotels with lower occupancy rates that are actually more profitable. “Those hotels manage to create more value per guest and are thereby building a stronger business.”

More scope for investment

According to Pontenagel, this also creates more scope for growth. In the case of owner-occupiers, where property management and ownership are in the same hands, strong property management can contribute to an increase in the property’s value and create additional financing opportunities for expansion or investment.

He observes that, as a result, more and more hoteliers are looking beyond room revenue alone. “Rooms remain the foundation of a hotel, but it is the positioning and the concept that really set it apart.” For hoteliers, this means that concept development, additional facilities and positioning are becoming increasingly directly linked to profitability and property value.