Hospitality Valuation Software 2.5

Jan A. deRoos, Cornell University School of Hotel Administration
Stephen Rushmore

Required Publisher Statement
© Cornell University. This report may not be reproduced or distributed without the express permission of the publisher.


[Revised 2008]

Developed by Stephen Rushmore, CRE, MAI, CHA and Jan deRoos, Ph.D. Stephen Rushmore is Founder and President of HVS International, a corporate partner of the CHR. Jan deRoos is HVS International Professor of Hotel Finance and Real Estate in the School of Hotel Administration at Cornell University. This tool is provided through the generosity of HVS International.

The Hospitality Valuation Software is the only non-proprietary computer software designed specifically to assist in the preparation of market studies, forecasts of income and expense, and valuations for lodging property. The software provides an accurate, consistent, and cost-effective way for hospitality professionals to forecast occupancy, revenues and expenses and to perform hotel valuations. Using established methodology, the Hospitality Valuation Software is a sophisticated tool for lodging professionals. The tool consists of three separate software programs written as Microsoft Excel files and a software users' guide. The three programs are:

The three programs are:

Room Night Analysis:

  • Enables the appraiser to evaluate the various competitive factors such as occupancy, average room rate, and market segmentation of all hotels in a local market.
  • Calculates the area-wide occupancy and average room rate, as well as the competitive market mix.
  • Produce a forecast of occupancy for each existing hotel or proposed hotel in a local market. The program incorporates such factors as competitive occupancies, market segmentation, unaccommodated demand, latent demand, growth of demand, and the relative competitiveness of each property in the local market. The program output is a ten-year projection of occupancy.

Fixed and Variable Revenue and Expense Analysis:

  • The key to any market study and valuation is a supportable forecast of revenues and expenses. Hotel revenue and expenses are comprised of many different components that display certain fixed and variable relationships to each other. This program enables the appraiser to input comparable financial operating data and forecast a complete 11-year income and expense statement by defining a small set of inputs:
  • The expected future occupancy levels for the subject hotel
  • Base year operating data for the subject hotel
  • Expected inflation rates for revenues and expenses

Hotel Capitalization Software:

  • A discounted cash flow valuation model utilizing the mortgage-equity technique forms the basis for this program. Values are produced under two different binding constraints:
  • A loan-to-value ratio, in which the size of the mortgage is based on property value.
  • A debt coverage ratio (also known as a debt-service coverage ratio), in which the size of the mortgage is based on property level cash flow.
  • By entering the terms of typical lodging financing, along with the ten-year forecast of revenue and expense, the program determines the value that provides the stated returns to the mortgage and equity components.