The matter of encumbrance : how management structure affects hotel value

Hodari, Demian (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland) ; Balla, Panna Judit (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland) ; Rajajagadeesan Aroul, Ramya (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland)

Hotel owners have two fundamental concerns: the financial operating performance of their asset and its selling price. While they often contract a hotel management company to operate the hotel through a lease or management agreement, common industry perception holds that such encumbrance decreases the sales price of hotel real estate assets. This implies that owners who outsource the hotel’s management may be sacrificing a greater selling price in exchange for improved operating results. While this is a critical issue for investors given that a their returns are largely dependent on an asset’s appreciation, the impact of different management structures on the sales price of hotels has not previously been studied. A hedonic valuation model was constructed based on 442 past hotel transactions in the United Kingdom between 2000 and 2015. Hotels sold encumbered by hotel management agreements and lease agreements were found to sell at a premium compared with unencumbered properties. The impact across different geographic areas and different economic periods was also examined. Hotels under management agreement achieved the highest premiums during times of economic expansion while lease contracts did so in regional markets. The findings suggest that owners need not necessarily refrain from signing management agreements or leases out of concern for their detrimental effect on their hotel’s sales price. It also provides a strong additional selling point for management companies and should reassure lenders who prefer to underwrite loans for encumbered assets.


Mots-clés:
Type d'article:
scientifique
Faculté:
Economie et Services
Ecole:
EHL
Classification:
Economie/gestion
Date:
2017
Pagination:
pp. 293-311
Publié dans
Cornell hospitality quarterly
Numérotation (vol. no.):
2017, vol. 58, no. 3, pp. 293-311
DOI:
ISSN:
1938-9655
Le document apparaît dans:

Note: The status of this file is: restricted


 Notice créée le 2017-09-04, modifiée le 2018-12-05

Fichiers:
Télécharger le document
PDF

Évaluer ce document:

Rate this document:
1
2
3
 
(Pas encore évalué)