Effects of Major Renovations on Hotel Market Penetration and Net Present Value
In this article, we seek to understand and quantify, through analysis, the impact of a major renovation on a hotel’s occupancy and rate penetration and, ultimately, the effect on income and net present value.
By Luigi Major, Vice President, Houston at HVS
market, researches the area's economics, and prepares a forecast of income and expenses, which is dependent on the appraiser's forecast of occupancy and rate for the subject property. On a typical appraisal, the forecast of occupancy and average rate for the subject property is supported by historical supply and demand trends in the submarket being studied, as well as the appraiser's knowledge and expertise of micro- and macroeconomic lodging trends. The forecast of occupancy and average rate becomes more challenging when the property in question has recently undergone a major renovation or is expected to undergo a major renovation, because the appraiser not only has to forecast occupancy and rate for the market and the subject property, but must also forecast any above-average increases to the subject property's occupancy and rate that will result in increased market penetration
Leora Halpern Lanz
Phone: +1 516-680-8529
HVS, the world"s leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries, celebrated its 35th anniversary in 2015. Established in 1980, the company performs 4,500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 35 offices and more than 500 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. HVS.com