In the world of real estate and investment, conducting due diligence is crucial to understanding the demand and supply dynamics of various markets. This process involves analyzing existing performance and forecasting future potential. At HVS, we take this task seriously by utilizing our extensive in-house database and the intellectual capital developed by our associates over the years. With over two decades of experience in covering these markets, we have a keen eye for observing and analyzing various economic and industry-specific cycles, giving us a unique perspective on fundamental changes.
To assess the performance of a notional 200-key hotel, we benchmark its performance against marketwide occupancy and average rate levels, both historically and forecasted. By using actual operating Profit and Loss statements, we can further comment on its performance and derive the net operating profit. We then apply the Income Capitalization Approach to calculate the economic value of the hotel, providing valuable insights into its worth.
Our latest HVS 2025 Asia Pacific Hotel Valuation Index uses the year 2010 as the new base year and a new basket of hotels for comparison. In 2010, the average base year value for a notional 200-room hotel across selected markets was approximately USD170,000, assigned an index of 1. By dividing the Per Available Room (PAR) value for each market by this base year value, we derive an index number that reflects the relative value of hotels in that market compared to the average base year value. For example, a PAR value of USD627,000 in Singapore in 2019 would result in an index number of 3.7, indicating that the value of Singapore hotels in 2019 was approximately 3.7 times that of the average base year value across selected markets in 2010.
The HVI assumes a calendar year end of December 31st for each year, with the capitalization rate reflecting trends in performance, competitive environment, and the cost of debt and equity. While the indicative values provided may not directly correlate to actual transactions, they offer a valuable snapshot of market trends and performance. This approach helps maintain the integrity of the HVI as a rolling index, providing valuable insights for investors and industry professionals.
For those interested in delving deeper into the data and analysis behind the HVS 2025 Asia Pacific Hotel Valuation Index, the full report is available for download. Stay informed and ahead of the curve in the ever-evolving real estate and investment landscape with HVS.
Real Estate & Investment.
