The value and risk of investing in a hotel (II) Value

“The Value and Risk of Investing in a Hotel (I) . . Questions from Risk:

Investment High-end hotels have known that there are so many “pits”,  but why are there so many enterprises to drill in?

Let’s take a look at the value of investing in high-end hotels.

First, the value of investing in hotels

After the risk of high-end hotels is controlled, the investment value is also reflected in more stable operation, cash flow stability. The overall property appreciation of well-run high-end hotel projects may exceed expectations and the valuation far exceeds the cost of hotel construction.

1, hotel value-added potential is considerable: Although hotel investment is a capital-intensive investment, large investment, long payback period, higher risk, overall growth is better, especially hotel land, hotel property value-added, which is also an important reason for many people to invest in hotels.

2, the phased operating benefits are significant: if the hotel’s investment location, timing are better, will also form more significant phased benefits.

3, the overall return balance of hotels: from a long-term investment perspective, investment in hotels relative to other industries of the overall return of the basic balance.

4, hotels for enterprises to bring stable cash flow: hotel investors can obtain long-term stable operating income, hotel operations will form a stable considerable cash flow.

5, the hotel for the enterprise comprehensive assets bonus: improve the enterprise financing, lending capacity of the comprehensive assessment value. Many companies are keen to invest in hotels even if they evaluate the long closing period of their hotel projects.

6, for investors to enhance the brand effect is prominent: many enterprises or individuals invest in hotels value the hotel can bring brand effect.

Second, high-end hotel value of the important keywords

Internet unicorns that are burned up by capital are rare, and capital is chosen at the same time as it chooses projects. Unicorn’s  N-fold valuation is bound to be beheaded countless peers, many of which have also received capital injections from venture capital firms, leaving some venture capital firms with no money to work on such projects.

Such as shared bicycles in addition to Mumbai and small yellow cars, even the best ride of small blue and small song bike also can not go on, you say how to do this sharing economy.

The “82 Law”  also exists in capital companies. As a result, capital companies seeking stable growth capital gains will gradually shift more capital from virtual reality to more specific immediate financial analysis from expected flow estimates.

Two important financial values: “profit”  and “cash flow”.   These two keywords also have great significance for high-end hotel investment. Of course, it is also an important value to invest in high-end hotels.  

Third, the role of hotel value in enterprise wind control and capital market

The above focuses on the hotel’s  “profit”  and “cash flow”.   The following will focus on corporate capital and the role of capital markets in this.

Profit is not equal to cash flow, if profit is positive, cash flow may also be negative. “Commonly some firms have high-profit statements and financial distress, in fact, cash flow is a better indicator of an enterprise’s profitability and ability to cope with financial risks.”

Cash flow is the blood of the enterprise, if the enterprise does not have sufficient cash flow is very difficult to run normally, if this situation can not be improved, will inevitably endanger the survival of the enterprise! Many large enterprises in the profit stage suddenly collapsed, the reason is that the company’s operation “serious blood loss”, lack of liquidity led to the break of the capital chain, the company can not function properly, and finally even bankrupt.

Of course, corporate capital should not only flow, but also obtain benefits from the flow, and any unprofitable business activities are also bleeding. In the modern economic field, some business models can be temporarily non-profitable, but be sure to know when they can make a profit, otherwise, it will cause a sustained “blood loss”  phenomenon, the consequences will be very serious!

Profits reflect the cash flow that is  “accrued”  for a given fiscal period, not the actual cash flow. Enterprises in the development of the two should complement each other, balance each other.

Measure whether the business is in good condition, whether there is enough cash to pay off debts, the ability to realize assets, etc. Processing emergency small amounts of money (such as the cost of the company’s regular operations), repaying interest on loan maturities, and shareholder dividends. As a result, cash flow becomes a very important indicator of capital financing.

To sum up, the value of the hotel in business activities, its wind control ability, and capital capacity in the enterprise can play an important role.

As a result, many real estate developers use investment hotels as a balanced asset to chase profits, and developing enterprises often invest in hotels as the cornerstone of the capital protection for the next strategic expansion of enterprises.

Fourth, the evaluation of hotel value:

A high-end hotel is worth a lot of value, ranging from tens of millions to hundreds of millions, because of the small number of transactions, its value also needs to be reflected through the results of operations. Hotels as collateral financing is a common means. The hotel property is a relatively stable cash flow of the operating property, as a mortgage is a major bank is a favorite product business.

Hotel value assessment ideas: the main method is the income method, through the analysis of the financial statements of the last three years, reference to the surrounding similar property operating conditions, to measure its normal operating objective income and operating costs, deduct the corresponding operating profit, measure its net income, with a certain reduction interest rate, operating period discount can be. Hotel assessments need to be evaluated as a whole and cannot be broken up separately.

Measure the value of a hotel project, understand how the hotel’s assets are priced, and determine the value of the hotel through its combination of business value and property value.

Friends interested in understanding the principles of hotel asset pricing can pay attention to the next issue of “Investment Hotel Value and Risk (III)” Asset Assessment and Pricing, stay tuned.