How to Value Hospitality Assets in a Dynamic Market (2026 Guide) 118

Valuing hospitality assets — whether motels, hotels, caravan parks or management rights — is a nuanced skill. In markets where rates fluctuate, tourism patterns shift and operating metrics vary region by region, the ability to accurately value a business can mean the difference between a strong acquisition and a costly misstep.

At CRE Brokers, we work with buyers and sellers every day, and a recurring theme is this: many investors misunderstand how valuation works in hospitality real estate. This guide demystifies the process and equips you with the right questions, metrics and perspective to value assets with confidence.

1. The Core of Hospitality Valuation: Business + Property

Unlike standard commercial property valuations, hospitality assets often involve property and operational performance:

• - Real estate value — underlying land and buildings
• - Business value — operations, goodwill, revenue and profit history

Together, these elements make up what the industry calls a Freehold Going Concern (or FHGOC valuation). The goal is to understand not just what the asset is worth, but what it earns and can earn under competent management.

The first step in any valuation is separating these two elements — especially if site value is rising while operating performance lags.

2. Key Metrics That Drive Valuations

Here are the most important metrics every buyer or seller should understand before committing:

A. Net Operating Profit (EBITDA)

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is the baseline measure of operating performance.

Valuers use EBITDA as the primary income indicator, and it is especially important for freehold assets where business performance influences overall value.

Ask: What is the adjusted EBITDA over the past 3–5 years?

B. Yield and Capitalisation Rates

Yield (or cap rate) is a key comparative metric.

It represents the income return relative to the asset price and reflects market sentiment, risk and expected returns.

Lower yields often signal higher investor confidence; higher yields imply higher risk expectations.

C. Revenue Multiples

Some valuers look at revenue multipliers — especially in motel and caravan park markets.

This involves multiplying annual revenue by an industry-standard factor to estimate value. However, caution is needed: revenue multiples don’t always reflect cost structure or margin quality.

D. Location and Market Dynamics

Location still matters. A motel on a major highway with solid traffic will command a different valuation than a motel in a declining tourism corridor.

Tourism trends, infrastructure changes and regional demand all feed into risk, expected returns and yield assumptions.

3. Valuation Methods Explained

1. Income Approach

The most common for hospitality assets — this method projects future income and discounts it to present value. It’s best when the business has stable history and predictable earnings.

2. Market Approach

This looks at comparable recent sales (e.g., similar motels or parks). It’s useful when there are reliable comparables in the same market.

3. Cost Approach

This calculates the cost to rebuild the asset from scratch. It’s less common for going concerns but useful when property improvements are substantial.

4. Common Valuation Pitfalls to Avoid

a. Ignoring Operational Adjustments

Gross revenue can be misleading; net operating profit tells the real story. Always adjust for:

• - Owner’s discretionary wages
• - Non-recurring expenses
• - Under-reported repairs or upgrades

b. Applying Generic Multiples

Standard revenue or EBITDA multiples vary widely between asset classes and regions. Motel multiples in Sydney Markets may differ significantly from caravan parks in northern NSW.

c. Failing to Account for Future CapEx

Deferred capital expenditure (CapEx) is often overlooked. A buyer must estimate near-term expenses for:

• - Roofs and infrastructure
• - Technology systems
• - Renovations and refresh cycles
  

This impacts valuation and investment return.

5. How CRE Brokers Supports Valuation Confidence

Valuing hospitality assets is not a theoretical exercise — it’s grounded in data, market experience and negotiation expertise.

At CRE Brokers, our valuation process involves:

• - Rigorously reviewed financials
• - Market comparables
• - Industry benchmarking
• - Longer-term tourism and demand forecasts

We help both buyers and sellers understand not just what an asset sold for historically, but what it should sell for today.

In Conclusion

Valuation is the cornerstone of successful hospitality transactions. Knowing the right metrics, spotting risk drivers and understanding future cash flow potential empowers investors and owners to make informed decisions.

If you’re preparing to buy, sell or refinance a hospitality asset, expert insight into value drivers can dramatically improve outcomes with CRE Brokers — both in negotiation and long-term performance.