How to Value a Hotel: A Practical Framework
Hotel valuation blends real estate and operating business valuation — get either half wrong and the number means nothing.
Ventura Research · 8 min read · Updated 24/07/2026
Key Takeaways
- Hotels are valued as trading businesses first and real estate second — EBITDA, not rental income, usually drives the number.
- Price per key is a useful sense-check, never a primary valuation method.
- RevPAR (occupancy x ADR) is the single most important operating metric to benchmark against the competitive set.
Why Hotels Value Differently to Other Real Estate
An office or retail unit is valued primarily on its income — a lease. A hotel’s income is generated by an operating business trading from the real estate, so hotel valuation methodology borrows heavily from business valuation: typically an EBITDA multiple, or a discounted cash flow of projected trading profit, rather than a simple income capitalisation.
RevPAR: The Core Operating Metric
Revenue Per Available Room (RevPAR) — occupancy multiplied by Average Daily Rate — is the industry-standard measure of trading performance, because it captures both how full the hotel is and how much it charges, unlike either occupancy or ADR alone. Comparing a hotel’s RevPAR against its local competitive set is the first diagnostic step in any hotel appraisal.
Price Per Key as a Sense-Check
Price per key (total price divided by room count) is a useful, fast way to sense-check a valuation against comparable transactions, but it should never be the primary method — it ignores F&B revenue, conference facilities, management contract terms, and the actual trading performance of the specific asset.
Common Mistakes
- Valuing a hotel purely on price per key without reference to its actual trading EBITDA.
- Comparing RevPAR across hotels in different markets or star ratings without adjusting for the competitive set.
- Ignoring the remaining term and terms of the management or franchise agreement, which materially affects both risk and achievable exit value.
Professional Insight
The occupancy gap to a hotel’s own competitive set is often more informative than its absolute RevPAR — a hotel running meaningfully below its comp set at similar rate typically signals a management or positioning opportunity rather than a fundamentally weak asset.
Frequently Asked Questions
What EBITDA multiple is typical for UK hotels?
This varies significantly by location, brand affiliation, and lease/management structure, and moves with the wider transaction market — there is no single "typical" multiple that holds across cycles, which is why comparable transaction evidence matters more here than in most other sectors.
Does the operator or brand affect value?
Significantly. A strong international brand with a long franchise or management agreement generally supports a lower yield (higher value) than an independent, unbranded operation, all else being equal, due to lower perceived demand risk.
Related Tools
Further Reading
Sources
- HVS UK Hotel Valuation Index
- Ventura Research
Reviewed by Ventura Investment Committee · v1.1 · First published 08/06/2026
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