TITLE

Hotels advised to capitalise income

PUB. DATE
February 1994
SOURCE
Accountancy;Feb1994, Vol. 113 Issue 1206, p96
SOURCE TYPE
Trade Publication
DOC. TYPE
Article
ABSTRACT
The article presents information on the British Association of Hotel Accountants' (BAHA) report, entitled Recommended Practice for the Valuation of Hotels. The report says that with exception of some smaller ones, hotels should be valued by reference to their current performance and future trading potential, by converting or expressing an estimate of projected net cash flows as a capital sum. This is known as the income capitalisation approach; it anticipates the benefits that will accrue through the ownership of a property and converts these benefits into an estimate of value. The preferred technique is the discounted cash flow approach, which capitalises a future series of cash flows through the application of a discounted rate. The other method, the earnings multiple approach, applies a multiplier to the maintainable earning the valuer has determined for a hotel. The BAHA prefers the discounted cash flow method because it is more responsive to the dynamic of future earnings over time, changes in market conditions, required maintenance or capital expenditure, residual value etc. At a time when few hotels have been sold, the establishment of an acceptable basis for hotel valuation would do much to make hotel company accounts more valuable and facilitate comparisons.
ACCESSION #
9504171488

 

Related Articles

  • On Comparing Residual Income and Discounted Cash Flow Models of Equity Valuation: A Response to Penman 2001 (CAR, Winter 2001). Lundholm, Russell J.; O'Keefe, Terrence B. // Contemporary Accounting Research;Winter2001, Vol. 18 Issue 4, p693 

    The authors comment on an article by S.H. Penman, which criticized an article by the authors. The authors' article argues that the value estimates from a residual income model and a discounted cash flow model should yield identical results. It is the aim of the authors to rebut each of Penman's...

  • Capitalization rates for regional shopping centers: Anchor... Kinnard, William N.; Geckler, Mary Beth // Real Estate Issues;Fall96, Vol. 21 Issue 2, p27 

    Discusses the use of income capitalization to value shopping centers in the United States and Canada. How the widespread use of this method represents the market behavior and thought processes of buyers and sellers; Why income capitalization is used when it is believed that discounted cash flow...

  • Present values: A useful underwriting tool? Okoneski, R. Joe // Appraisal Journal;Oct94, Vol. 62 Issue 4, p609 

    Suggests important considerations for choosing the appropriate discounted cash flow (DCF) analysis for a particular project or purpose. Lenders use of DCF analysis techniques; Fundamentals; Use for underwriting purposes.

  • Investment Appraisal.  // Accountancy;Mar1965, Vol. 76 Issue 859, p195 

    Discusses the impact of Discounted Cash Flow (DCF) on investment. Application of DCF principles on prominent company; Under-valuation of benefits; Method of appraising investment.

  • Discounted Cash Flow.  // Accountancy;Apr1968, Vol. 79 Issue 896, p272 

    Responds to a question on discounted cash flow (DCF). Financial appraisal of a proposed product; Absence of distinction in DCF calculations between capital, income, expense or profit; Assumption of the use of assets or facilities for which no cash value can easily be found.

  • Changing Emphasis in Appraisal Techniques: The Transition to Discounted Cash Flow. Korpacz, Peter F.; Roth, Mark I. // Appraisal Journal;Jan1983, Vol. 51 Issue 1, p21 

    Discusses the increasing use of Discounted Cash Flow (DCF) in real estate appraisal in the United States. Factors affecting the validity and usefulness of traditional valuation techniques; Limitations of cost, market data, income, and direct capitalization approaches; Effects of DCF on...

  • Testing the reasonableness of discounted cash flow analysis. Accetta, Gregory J. // Appraisal Journal;Jan1998, Vol. 65 Issue 1, p62 

    Describes the methods and tests used in determining the reasonableness of discounted cash flow (DCF) analysis. Information on the six categories of tests of reason; Sources of data for checking a DCF rate.

  • NCREIF Executive Summary and Discounted Cash Flow (DCF) Database. Fisher, Jeffrey D.; McWilliams, Ted // Appraisal Journal;Oct2001, Vol. 69 Issue 4, p362 

    Discusses the development of a database of a standardized executive summary of appraisals for NCREIF properties by the NCREIF Valuation Committee. Purpose of the summary; Emphasis on discounted cash flow assumptions; Features of the summary.

  • Discounted Cash Flow Analysis: Where Do We Stand Today? Gordon Jr., Roy L. // Appraisal Journal;Apr88, Vol. 56 Issue 2, p259 

    Discusses the evolution of discounted cash flow (DCF) analysis into the principal analytical technique in appraisal methodology. Use of DCF as forecasts duplicate the actual pattern of cash flows associated with the provisions of existing leases; Typical forecast with income flows for ten years...

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics