Proposed Limited-Service Hotel

Transcription

ECONOMIC FEASIBILITY STUDY AND NARRATIVE APPRAISAL REPORT
STEWART STREET
VANDERHOOF, BRITISH COLUMBIA - CANADA
SUBMITTED TO:
July-2014
PR OPOSED
PREPARED BY:
Ms. Erin Siemens
District of Vanderhoof Canada
160 Connaught Street, Post Office Box 900
Vanderhoof, British Columbia, V0J 3A0
HVS Consulting and Valuation Services
DBA: MM&R Valuation Services, Inc.
145 West 17th Street, Suite 400
North Vancouver, BC, V7M 3G4
+1 (250) 567-4711
+1 (604) 988-9743
July 21, 2014
Ms. Erin Siemens
District of Vanderhoof Canada
160 Connaught Street, Post Office Box 900
Vanderhoof, British Columbia, V0J 3A0
Re:
HVS VANCOUVER
145 West 17th Street, Suite 400
North Vancouver, BC, V7M 3G4
Vanderhoof, British Columbia - Canada
HVS Reference: 2014070049
+1 (604) 988-9743
+1 (604) 988-4625 FAX
www.hvs.com
Atlanta
Boston
Boulder
Chicago
Dallas
Denver
Houston
Las Vegas
Los Angeles
Mexico City
Miami
Minneapolis
Dear Ms. Siemens:
Pursuant to your request, we herewith submit our narrative appraisal report
pertaining to the above-captioned proposed hotel. We have inspected the real
estate and analyzed the market conditions in the area Vanderhoof, British
Columbia. We have also reviewed the improvements that are proposed for the
subject site.
Based on our analysis, it is our opinion that the prospective “when complete”
market value of the fee simple interest in the real and personal property of the
Proposed Limited-Service Hotel, as of January 1, 2017, in Canadian dollars, will be:
$10,400,000
Nassau
New York
TEN MILLION FOUR HUNDRED THOUSAND DOLLARS
Newport
Philadelphia
This value estimate equates to $130,000 per room (rounded).
San Francisco
St. Louis
Toronto
Vancouver
Washington
Athens
Beijing
Buenos Aires
Dubai
Hong Kong
Lima
London
Milan
Moscow
Mumbai
New Delhi
Sao Paulo
Shanghai
Singapore
Superior results through unrivaled
hospitality intelligence. Everywhere.
We have made no assumptions of hypothetical conditions in our report. The
analysis is based on the extraordinary assumption that the described
improvements have been completed as of the prospective "when complete" date of
value. The reader should understand that the completed subject property does not
yet, in fact, exist as of the date of appraisal. Our appraisal does not address
unforeseeable events that could alter the proposed project and/or the market
conditions reflected in the analyses; we assume that no significant changes, other
than those anticipated and explained in this report, will take place between the
date of inspection and date of prospective value. The use of this extraordinary
assumption may have affected the assignment results. We have made no other
extraordinary assumptions specific to this appraisal. However, several important
general assumptions have been made that apply to this appraisal and our
valuations of proposed hotels in general. These aspects are set forth in the
Assumptions and Limiting Conditions chapter of this report.
We hereby certify that we have no undisclosed interest in the property, and our
employment and compensation are not contingent upon our findings. This study is
subject to the comments made throughout this report and to all assumptions and
limiting conditions set forth herein.
Sincerely,
MM&R Valuation Services, Inc.
Eric Wright, Senior Associate
[email protected], +1 (604) 988-9743 ext. 22
Carrie Russell, AACI, MAI, RIBC, Managing Director
[email protected], +1 (604) 988-9743 ext. 25
Table of Contents
SECTION
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
TITLE
Summary of Salient Data and Conclusions
Nature of the Assignment
Description of the Site and Neighbourhood
Description of the Proposed Improvements
Market Area Analysis
Supply and Demand Analysis
Projection of Occupancy and Average Rate
Highest and Best Use
Approaches to Value
Income Capitalization Approach
Sales Comparison Approach
Cost Approach
Reconciliation of Value Indications
Statement of Assumptions and Limiting Conditions
Certification
PAGE
5
8
14
22
25
37
60
69
71
72
102
115
120
123
126
Addenda
Penetration Explanation
i
Explanation of the Simultaneous Valuation Formula
v
Hotel Sales 2011 - 2013
Qualifications
1. Summary of Salient Data and Conclusions
Project:
Location:
Interest Appraised:
Highest and Best Use (as if vacant):
Stewart Street
Vanderhoof, British Columbia
Fee simple
Develop a limited-service lodging facility
LAND DESCRIPTION
Area:
Zoning:
Legal Description:
Flood Zone:
2.50 acres, or 108,900 square feet
To be determined
Lot C, Section 9, Township 11, Range 5, Coast District Plan
BCP 48049
According to the District of Vanderhoof, the subject site is
not located in an area of flood risk.
PROPOSED IMPROVEMENTS DESCRIPTION
Expected Opening Date:
Property Type:
Building Area:
Guestrooms:
Number of Storeys:
Food and Beverage Facilities:
Meeting Space:
Additional Facilities:
Parking Spaces:
July-2014
January 1, 2017
Limited-service lodging facility
44,800 square feet
80
Four
A breakfast dining area
625 square feet
An exercise room, a business center, vending areas, and a
guest laundry room
100
Proposed Limited-Service Hotel – Vanderhoof, British Columbia - Canada
5
SUMMARY OF VALUE PARAMETERS
Number of Years to Stabilize:
Stabilized Year:
Three (after opening)
2019
VALUATION ASSUMPTIONS
Mortgage Interest Rate:
Amortization Period:
Debt Service Constant:
Loan-to-Value Ratio:
Inflation Rate:
Equity Yield Rate:
Terminal Capitalization Rate:
Selling Expenses:
Holding Period:
Calculated Discount Rate:
Derived Capitalization Rates:
5.00%
20 years
0.078855
60%
2.0%
19.0%
11.0%
2.0%
10 years
11.9%
8.3% (Year 1), 10.7% (Deflated Stabilized)
VALUE OPINIONS AS OF JANUARY 1, 2017
Income Capitalization Approach:
Sales Comparison Approach:
Cost Approach:
$10,400,000
$8,500,000 to $11,100,000
$10,300,000
Prospective “When Complete” Market Value:
$10,400,000 ($130,000 per room)
ASSIGNMENT CONDITIONS
Extraordinary Assumptions:
July-2014
The analysis is based on the extraordinary assumption
that the described improvements have been completed as
of the prospective "when complete" date of value. The
reader should understand that the completed subject
property does not yet, in fact, exist as of the date of
appraisal. Our appraisal does not address unforeseeable
events that could alter the proposed project and/or the
market conditions reflected in the analyses; we assume
that no significant changes, other than those anticipated
and explained in this report, will take place between the
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date of inspection and date of prospective value. The use
of this extraordinary assumption may have affected the
assignment results. We have made no other extraordinary
assumptions specific to this appraisal. However, several
important general assumptions have been made that
apply to this appraisal and our valuations of proposed
hotels in general. These aspects are set forth in the
Assumptions and Limiting Conditions chapter of this
report.
Hypothetical Conditions:
July-2014
We have made no assumptions of hypothetical conditions
in our report.
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2. Nature of the Assignment
Subject of the
Appraisal
The subject of this appraisal is the fee simple interest in a 108,900-square-foot
(2.50-acre) site to be improved with a limited-service lodging facility. The subject
site is located on Stewart Street in Vanderhoof, British Columbia. It is assumed that
the hotel site will be subdivided from a larger 12-acre parcel of land that will also
potentially accommodate a satellite campus for the College of New Caledonia and a
new aquatic centre.
The feasibility of the college campus and the aquatic centre is currently under
study; however, the conclusions of this appraisal report are not contingent upon
the results of those other studies. The development of the college campus and the
aquatic centre would be beneficial to the proposed subject hotel, but we believe
that market conditions are strong enough to support a stand-alone hotel even
without the development of the college campus and the aquatic centre. It should be
noted that the demand projections in this report do not include the potential
demand that would come from the college and the aquatic centre. As such, there is
potential upside in our demand growth projections should these facilities be
confirmed.
After our review and analysis of the competitive hotel market, we recommend that
the proposed subject hotel be affiliated with a regional brand affiliation, such as
Pomeroy Inn & Suites, Canalta Hotel, or Microtel Inn & Suites. The proposed
subject property is assumed to open with 80 guestrooms on January 1, 2017. We
recommend that the proposed subject hotel have a breakfast dining area, 625
square feet of meeting space, an exercise room, a business center, vending areas,
and a guest laundry room. The proposed subject property should also have all the
necessary back-of-the-house space required for a lodging facility of this type.
Property
Rights Appraised
The property rights appraised are the fee simple ownership of the land and
improvements, including the furniture, fixtures, and equipment. The fee simple
estate is defined as “absolute ownership unencumbered by any other interest or
estate, subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat."1
The Proposed Limited-Service Hotel is appraised as an open and operating facility.
1
July-2014
The Dictionary of Real Estate Appraisal, 5th ed. (Chicago Appraisal Institute, 2010).
8
Pertinent Dates
The effective date of the prospective “when complete” market value opinion is
January 1, 2017. All projections are expressed in inflated dollars. Eric Wright
inspected the subject site on April 23, 2014. Carrie Russell, AACI, MAI, RIBC,
participated in the analysis and reviewed the findings but did not personally
inspect the property.
Ownership, Franchise,
and Management
Assumptions
This economic feasibility study has been prepared for the District of Vanderhoof.
As of the date of this appraisal report, there is not a specific developer attached to
the project. The current owner of the 12-acre plot of land, from which it is
assumed the subject site will be subdivided, is the District of Vanderhoof. No
transfers of the property have reportedly occurred in the past three years. The
subject site is neither under contract for sale nor listed for sale at this time.
Details pertaining to management terms were not yet determined at the time of
this report; therefore, our forecast fees represent a blended average of what would
be expected on a base-fee and incentive-fee basis. The total management fee is
forecast at 5.0% of total revenue in this study. Please refer to the “Income
Capitalization Approach” chapter for additional discussion of our management fee
assumptions.
The proposed hotel is expected to be managed by the brand throughout the
forecast period and will, therefore, not be subject to franchise fees.
Objective of the
Appraisal
The objective of the appraisal is to develop an opinion of the subject property’s
[add what type of value(s):] “as is" market value, “when complete” prospective
market value, and “when stabilized” prospective market value. The Appraisal
Institute of Canada provides the following definition of market value:
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and seller,
each acting prudently and knowledgeably, and assuming the price is not
affected by undue stimulus.
July-2014
1.
buyer and seller are typically motivated;
2.
both parties are well informed or well advised and acting in what
they consider their own best interests;
3.
a reasonable time is allowed for exposure in the open market;
4.
payment is made in terms of cash in Canadian dollars or in terms of
financial arrangements comparable thereto; and
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5.
the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.2
Prospective market value is defined by the Appraisal Institute as follows:
A value opinion effective as of a specified future date.3
Intended Use of the
Appraisal
This narrative report is being prepared to determine the feasibility of the
proposed subject property.
Identification of the
Client and Intended
User(s)
The client for this engagement is the District of Vanderhoof Canada. This report is
intended for the addressee firm, and may not be distributed to or relied upon by
other persons or entities.
Assignment Conditions
“Extraordinary assumption” is defined in CUSPAP as follows:
Extraordinary assumptions refer to a hypothesis, either supposed or
unconfirmed, which, if not true, could alter the appraiser’s opinions and
conclusions.
Comment: Extraordinary assumptions presume as fact otherwise uncertain
information about physical, legal, or economic characteristics of the subject
property; or about conclusions external to the property, such as market
conditions, trends or the integrity of the data used in an analysis.4
The analysis is based on the extraordinary assumption that the described
Canadian Uniform Standards of Professional Appraisal Practice (Appraisal Institute of
Canada, 2012), pg. 53.
3 The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010).
4 Canadian Uniform Standards of Professional Appraisal Practice (Appraisal Institute of
Canada, 2012), pg. 60.
2
July-2014
10
“Hypothetical condition” is defined in CUSPAP as follows:
That which is contrary to what exists but supposed for the purpose of
analysis.
Comment: Hypothetical conditions presume as fact simulated but untrue
information about physical, legal, or economic characteristics of the subject
property; or external conditions.5
We have made no assumptions of hypothetical conditions in our report.
Marketing and
Exposure Periods
The concepts of marketing period and exposure period are similar and simply
reflect different perspectives in time. Exposure period is defined as the estimated
length of time that the property interest being appraised would have been offered
on the market prior to the hypothetical consummation of a sale at its market value,
as of the date of value. The exposure period reflects a retrospective opinion based
on an analysis of past events and assumes a competitive and open market.
Marketing period refers to the amount of time necessary to market the hotel
subsequent to our date of value for it to sell for the appraised value, and thus is a
prospective opinion.
The exposure period for the proposed subject property, prior to our date of value,
is estimated to be less than or equal to twelve months, while the marketing period
for the proposed subject property, subsequent to our date of value, is less than or
equal to twelve months. The marketing and sales process for hotels is extremely
efficient. Brokers specializing in hotel transactions actively solicit potential buyers
on an ongoing basis and maintain databases on hotel investor criteria. According
to the brokers interviewed, the current period from when a property is listed to
when the sale closes is typically six to nine months. Brokers are able to
electronically produce marketing materials, elicit interest, schedule property
tours, accept offers, and select a buyer in approximately 90 to 120 days. Following
the execution of a purchase and sale agreement, the due diligence and closing
period is typically 90 days.
Hotel properties are being actively sought after by investors. Since the economic
downturn, funds have been established to pursue hotel acquisitions. Quality assets
often solicit numerous bids, and for willing buyers and sellers, the marketing
process has resulted in the timely closing of transactions.
Canadian Uniform Standards of Professional Appraisal Practice (Appraisal Institute of
Canada, 2012), pg. 60.
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July-2014
11
Competency
Our qualifications are included as an addendum to this report. These qualifications
reflect that we have the competence required to complete this engagement. Our
knowledge and experience is appropriate for the complexity of this assignment.
Scope of Work
The methodology used to develop this appraisal is based on the market research
and valuation techniques set forth in the textbooks authored by Hospitality
Valuation Services for the American Institute of Real Estate Appraisers and the
Appraisal Institute: The Valuation of Hotels and Motels,6 Hotels, Motels and
Restaurants: Valuations and Market Studies,7 The Computerized Income Approach
to Hotel/Motel Market Studies and Valuations,8 Hotels and Motels: A Guide to
Market Analysis, Investment Analysis, and Valuations,9 and Hotels and Motels –
Valuations and Market Studies.10
1.
All information was collected and analyzed by the staff of MM&R Valuation
Services, Inc. Information was supplied by the client and/or the property’s
development team.
2.
The subject site has been evaluated from the viewpoint of its physical utility
for the future operation of a hotel, as well as access, visibility, and other
relevant factors.
3.
The subject property's proposed improvements have been reviewed for their
expected quality of construction, design, and layout efficiency.
4.
The surrounding economic environment, on both an area and neighborhood
level, has been reviewed to identify specific hostelry-related economic and
demographic trends that may have an impact on future demand for hotels.
5.
Dividing the market for hotel accommodations into individual segments
defines specific market characteristics for the types of travelers expected to
utilize the area's hotels. The factors investigated include purpose of visit,
average length of stay, facilities and amenities required, seasonality, daily
demand fluctuations, and price sensitivity.
Stephen Rushmore, The Valuation of Hotels and Motels (Chicago: American Institute of
Real Estate Appraisers, 1978).
7 Stephen Rushmore, Hotels, Motels and Restaurants: Valuations and Market Studies
(Chicago: American Institute of Real Estate Appraisers, 1983).
8 Stephen Rushmore, The Computerized Income Approach to Hotel/Motel Market Studies and
Valuations (Chicago: American Institute of Real Estate Appraisers, 1990).
9 Stephen Rushmore, Hotels and Motels: A Guide to Market Analysis, Investment
Analysis, and Valuations (Chicago: Appraisal Institute, 1992).
10 Stephen Rushmore and Erich Baum, Hotels and Motels – Valuations and Market Studies
(Chicago: Appraisal Institute, 2001).
6
July-2014
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6.
An analysis of existing and proposed competition provides an indication of
the current accommodated demand, along with market penetration and the
degree of competitiveness. Unless noted otherwise, we have inspected the
competitive lodging facilities summarized in this report.
7.
Documentation for an occupancy and average rate projection is derived
utilizing the build-up approach based on an analysis of lodging activity.
8.
A detailed projection of income and expense made in accordance with the
Uniform System of Accounts for the Lodging Industry sets forth the
anticipated economic benefits of the subject property.
9.
The appraisal considers the following three approaches to value: cost, sales
comparison, and income capitalization. We have investigated numerous
improved sales in the market area and have spoken with buyers, sellers,
brokers, property developers, and public officials. Because lodging facilities
are income-producing properties that are normally bought and sold on the
basis of capitalization of their anticipated stabilized earning power, the
greatest weight is given to the value indicated by the income capitalization
approach. We find that most hotel investors employ a similar procedure in
formulating their purchase decisions, and thus the income capitalization
approach most closely reflects the rationale of typical buyers.
The value conclusion conveyed in this narrative report is based on this
investigation and analysis.
July-2014
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3. Description of the Site and Neighborhood
The suitability of the land for the operation of a lodging facility is an important
consideration affecting the economic viability of a property and its overall value.
Factors such as size, topography, access, visibility, and the availability of utilities
have a direct impact on the desirability of a particular site.
The subject site is located on the south side of Stewart Street East, midway
between the three-way junction formed by Creasy Avenue and Stewart Street East,
and the intersection formed by Recreation Avenue and Stewart Street East.
Physical Characteristics
The subject site will measure approximately 2.50 acres, or 108,900 square feet.
The parcel's adjacent uses are set forth in the following table.
FIGURE 3-1
SUBJECT PARCEL'S ADJACENT USES
Direction
Adjacent Use
North
Stewart Street East, public basball diamond
Grove of trees
Recreation Avenue, public baseball diamond
Stewart Street East, School Bus Lot
South
East
West
July-2014
Description of the Site and Neighborhood
14
VIEW OF SUBJECT SITE
AERIAL PHOTOGRAPH
July-2014
15
VIEW FROM SITE TO THE NORTH
VIEW FROM SITE TO THE SOUTH
VIEW FROM SITE TO THE EAST
VIEW FROM SITE TO THE WEST
Primary vehicular access to the proposed subject hotel will be provided by Stewart
Street East. Additional access will be available from Recreation Avenue. The
topography of the parcel is generally flat, and the site’s shape is irregular
Site Utility
July-2014
Upon completion of construction, the subject site will not contain any significant
portion of undeveloped land that could be sold, entitled, and developed for
alternate use. The site is expected to be fully developed with site or building
improvements, which will contribute to the overall profitability of the hotel.
16
Access and Visibility
It is important to analyze the site in regard to ease of access with respect to
regional and local transportation routes and demand generators. The subject site
is readily accessible to a variety of local and county roads, as well as state and
interstate highways.
MAP OF REGIONAL ACCESS ROUTES
Primary regional access through the area is provided by Highway 16, a major
east/west route, which extends to such cities as Prince George and Edmonton to
the east, and Prince Rupert to the west. Highway 16 also connects with Highway
97 at Prince George, providing a north-south connection to the Yukon and Alaska
to the north, and through the centre of BC and the United States border to the
south. The subject market is served by a variety of additional local highways,
which are illustrated on the map.
July-2014
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Heading west, from Highway 16 motorists turn right onto Recreation Avenue, and
proceed half a kilometer to where the subject site is located on the motorists' lefthand side. Alternatively, heading east, from Highway 16 motorists turn left onto
Burrard Avenue, turn right onto Stewart Street East, and proceed for
approximately one kilometre to where the subject site is located on the motorists'
right-hand side. The subject site is adjacent to a public baseball diamond. The
proposed subject hotel is expected to have adequate signage at the street; thus, the
hotel should benefit from good visibility from within its local neighborhood.
Airport Access
The proposed subject hotel will be served by the Prince George Airport, which is
located approximately 110 kilometers east of the subject site. From the airport,
motorists will take Ellis Road, proceed onto Sintich Road, and turn right onto
Cariboo Highway. Motorists will then follow signs for Vanderhoof, merge onto
Ferry Avenue, and turn left onto Yellowhead Highway. After travelling west for
approximately 95 kilometers, motorists will turn right onto Recreation Avenue
where the subject site is located on the left-hand side.
Neighbourhood
The neighborhood surrounding a lodging facility often has an impact on a hotel's
status, image, class, style of operation, and sometimes its ability to attract and
properly serve a particular market segment. This section of the report investigates
the subject neighborhood and evaluates any pertinent location factors that could
affect its future occupancy, average rate, and overall profitability.
The subject site’s neighbourhood is generally defined by Victoria Street East to the
north, Recreation Avenue to the east, Highway 16 to the south, and Burrard
Avenue to the west. The neighbourhood is in the stable stage of its life cycle.
Within the immediate proximity of the subject site, land use is a mix of
commercial, industrial, and residential. The neighourhood is characterized by
restaurants, retail centers, small offices, educational institutions, recreational
facilities, and industrial facilities.
Businesses in the area are largely supported by the approximate 550 student
Nechako Valley Secondary School directly northwest of the subject site. These
businesses include CIBC Banking Centre, Petro Canada Gas Station, Co-op Grocery
Store, Royal LePage, Home Hardware, Vanderhoof Chamber of Commerce, Work
BC Employment Services Centre, Service BC, and P&H Supplies Warehouse.
Restaurants in the neighbourhood include A&W, Tim Horton’s, Cozy Corner
Pizzeria, New Pagoda Restaurant, and Woody’s Bakery & Coffee Shop. The
proposed subject hotel's opening should be a positive influence on the area; the
hotel will be in character with and will complement surrounding land uses.
July-2014
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MAP OF NEIGHBOURHOOD
The proposed subject hotel will potentially be built in conjunction with an aquatic
centre and a satellite campus for the College of New Caledonia. The following map
illustrates these proposed developments.
July-2014
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MAP OF PROPOSED DEVELOPMENTS IN THE VICINITY OF THE SUBJECT SITE
The College of New Caledonia (CNC) is a post-secondary educational institution
that operates six regional campuses in Prince George, Burns Lake, Fort St. James,
Mackenzie, Quesnel, and Vanderhoof. The CNC has an annual enrollment of 5,000
students in health sciences, trades, university studies, career access, and
continuing education.
The proposed college campus expansion will comprise approximately 40,000
square feet and will reportedly cost $15-million to construct. The campus will
reportedly focus on trades-related skills.
July-2014
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The proposed aquatic centre will feature an indoor swimming pool and will
reportedly cost $12-million to construct.
It should be noted that the demand projections in this report do not include the
potential demand that would come from the college and the aquatic centre. As
such, there is potential upside in our demand growth projections should these
facilities be confirmed. If built, the satellite college campus and the aquatic centre
would further contribute to demand growth, particularly within the leisure and
group segments.
Overall, the supportive nature of the development in the immediate area is
considered appropriate for and conducive to the operation of a hotel.
Utilities
The subject site will reportedly be served by all necessary utilities.
Soil and
Subsoil Conditions
Geological and soil reports were not provided to us or made available for our
review during the preparation of this report. We are not qualified to evaluate soil
conditions other than by a visual inspection of the surface; no extraordinary
conditions were apparent.
Nuisances
and Hazards
We were not informed of any site-specific nuisances or hazards, and there were no
visible signs of toxic ground contaminants at the time of our inspection. Because
we are not experts in this field, we do not warrant the absence of hazardous waste
and urge the reader to obtain an independent analysis of these factors.
Flood Zone
According to the District of Vanderhoof, the subject site is not located in an area of
flood risk.
Zoning
To be determined.
Easements and
Encroachments
We are not aware of any easements attached to the property that would
significantly affect the utility of the site or marketability of this project.
Conclusion
We have analyzed the issues of size, topography, access, visibility, and the
availability of utilities. In general, the site should be well suited for future hotel
use, with acceptable access, visibility, and topography for an effective operation.
July-2014
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4. Description of the Proposed Improvements
The quality of a lodging facility's physical improvements has a direct influence on
marketability, attainable occupancy, and average room rate. The design and
functionality of the structure can also affect operating efficiency and overall
profitability. This section investigates the proposed physical improvements and
personal property in an effort to determine how they are expected to contribute to
attainable cash flows.
Project Overview
The proposed subject property is assumed to be a four-storey, limited-service
lodging facility containing 80 rentable units. The property is assumed to open on
January 1, 2017. Our projections assume that the proposed subject property will
have a regional brand affiliation; however, no specific brand has been selected.
Taking into account local market conditions and the location of the proposed
subject property, the brands that are appropriate for this type of development
include Pomeroy Inn & Suites, Microtel Inn & Suites, Canalta, and Best Western.
Site Improvements and
Hotel Structure
Once guests enter the site, it is assumed ample parking will be available on the
surface lot around the perimeter of the hotel. Site improvements should include
freestanding signage, located on the northern and southern sides of the site
(additional signage should be placed on the exterior of the building). We assume
that all signage will adequately identify the property and meet brand standards.
Planned landscaping should allow for a positive guest impression and competitive
exterior appearance.
The hotel structure is assumed to be a single building with a wood-frame and a
concrete foundation. The exterior of the hotel is expected to be finished with a
combination of stucco and vinyl siding. Two stairways and one hydraulic elevator
will provide internal vertical transportation within the structure. The roof will be
made of wood trusses covered with plywood and composition shingles. Doublepane windows will be installed to reduce noise transmission into the rooms.
Heating and cooling will be provided by through-the-wall units and a large central
system for the public areas. Overall, the assumed building components are normal
for a hotel of this type, and they would meet the standards for this market. We
assume that all the structural components will meet local building codes.
Public Areas
July-2014
It is anticipated that guests will enter the hotel through two sets of automatic
doors separated by a vestibule. The lobby should be adequate and appropriate for
a limited-service hotel. The front desk should be large enough to allow for ease of
guest check-in and services, and it should be installed with appropriate property
22
management and telephone systems. The furnishings and finishes in this space are
expected to offer an appropriate first impression, and the design of the space
should foster adequate efficiency.
The breakfast dining area is expected to be located opposite the front desk in the
lobby.
The proposed subject hotel is expected to offer one meeting room, which will be
located off the lobby and the breakfast dining area on the first floor. The meeting
room will also serve as additional space for the complimentary continental
breakfast.
The proposed subject hotel is assumed to offer a fitness facility that will provide a
competitive offering for what is found in a typical limited-service hotel.
Other amenities are expected to include a business centre, as well as vending areas
with ice machines on the first and third floor.
Guestrooms
It is anticipated that the proposed subject hotel will feature a standard guestroom
configuration. Guestrooms will be present on all four floors. The guestrooms will
measure approximately 350 square feet and offer typical amenities for this
product type. The guestrooms will be in king, queen, or double/double
configurations, and they will feature an armoire with a flat-panel television, an
armchair with an ottoman, a work desk with chair, bedside tables, and
appropriate, adequate lighting. All the guestrooms will provide high-speed,
wireless Internet access.
The guestroom bathrooms are expected to be the standard size with either a
shower-in-tub or a shower unit, in addition to a commode and a single sink with a
vanity area featuring a granite countertop.
We assume that the management will create non-smoking rooms as needed. This
type of amenity costs very little and requires no structural changes. We expect that
the number of rooms allocated to this purpose will be increased or reduced
depending on demand and guest response.
The interior guestroom corridors should be wide and functional, permitting the
easy passage of housekeeping carts.
July-2014
23
Back-of-the-House
The hotel is expected to be served by the necessary back-of-the-house space,
including an in-house laundry facility, administrative offices, and a prep kitchen to
service the needs of the breakfast dining area. These spaces should be adequate for
a hotel of this type and should allow for the efficient operation of the property
under competent management.
Environmental
We assume that the proposed subject property will be built according to all
pertinent codes and brand standards and that no environmental hazards will be
created during construction.
Capital Expenditures
Our analysis assumes that, after its opening, the hotel will require ongoing
upgrades and periodic renovations in order to maintain its competitive level in
this market and to remain compliant with brand standards. These costs should be
adequately funded by the forecasted reserve for replacement, as long as a
successful, ongoing preventive-maintenance program is employed by hotel staff.
Conclusion
Overall, the proposed subject hotel should offer a well-designed, functional layout
of support areas and guestrooms. All typical and market-appropriate features and
amenities appear to be included in the hotel's design. We assume that the building
will be fully open and operational on the stipulated opening date and will meet all
local building codes and brand standards. Furthermore, we assume that the hotel
staff will be adequately trained to allow for a successful opening and that premarketing efforts will have introduced the product to major local accounts at least
six months in advance of the opening date.
July-2014
24
5. Market Area Analysis
The economic vitality of the market area and neighborhood surrounding the
subject site is an important consideration in forecasting lodging demand and
future income potential. Economic and demographic trends that reflect the
amount of visitation provide a basis from which to project lodging demand. The
purpose of the market area analysis is to review available economic and
demographic data to determine whether the local market will undergo economic
growth, stabilize, or decline. In addition to predicting the direction of the economy,
the rate of change must be quantified. These trends are then correlated based on
their propensity to reflect variations in lodging demand, with the objective of
forecasting the amount of growth or decline in visitation by individual market
segment (e.g., commercial, meeting and group, and leisure).
Market Area Definition
The market area for a lodging facility is the geographical region where the sources
of demand and the competitive supply are located. The subject site is located in the
district of Vanderhoof and the province of British Columbia.
Vanderhoof was founded in 1914 by Chicago publicist, Herbert Vanderhoof, who
had hopes of enticing settlers to migrate to the village by promising unlimited
farming, homes, and businesses. Vanderhoof soon became a hub for ranching and
logging having been incorporated as a village in 1926, and becoming a District
Municipality in 1982. Vanderhoof is situated at the geographical centre of British
Columbia in the Bulkley-Nechako region at the junction of Highways 16 and 27.
The District is located between the communities of Fraser Lake to the west, and
Fort St. James to the north. Additionally, the city is approximately 95 kilometres
west of Prince George. Today, the community flourishes through its traditional
natural resource based economy comprised of its forestry, agriculture, mining, and
tourism sectors.
July-2014
25
MAP OF MARKET AREA
Provincial and National
Overview
FIGURE 5-1
The following table summarizes historical and forecasted economic indicators for
British Columbia and Canada.
ECONOMIC INDICATORS – BRITISH COLUMBIA VS. CANADA
Real GDP Growth (% Change)
Canada
British Columbia
2011
2.5 %
2.6
2012
1.7 %
1.7
2013
1.8 %
1.5
2014f
2.4 %
2.7
2015f
2.6 %
3.1
2016f
2.4 %
3.2
2017f
2.2 %
2.4
2018f
1.9 %
1.9
Average Annual
Growth Rate
2.2 %
2.4
Employment Growth (% Change)
Canada
British Columbia
2011
1.5 %
0.8
2012
1.2 %
1.6
2013
1.3 %
0.0
2014f
1.4 %
1.4
2015f
1.8 %
2.1
2016f
1.5 %
1.9
2017f
1.2 %
1.3
2018f
1.0 %
1.2
Average Annual
Growth Rate
1.4 %
1.3
Unemployment Rate (%)
Canada
British Columbia
2011
7.5 %
7.5
2012
7.3 %
6.8
2013
7.2 %
6.6
2014f
7.0 %
6.5
2015f
6.4 %
6.0
2016f
6.0 %
5.4
2017f
5.7 %
5.1
2018f
5.6 %
4.9
Average Annual
Growth Rate
6.6 %
6.1
Source: The Conference Board of Canada Metropolitan Outlook - Winter 2014
July-2014
26
British Columbia
British Columbia is Canada's third most populous province with 4.6 million people.
As the westernmost province of Canada, BC marks the end of the transcontinental
highway and railways, and it is also home to several international sea ports. The
province's economy is dominated by the resource sector, particularly the forestry
and mining industries.
Since the upsurge in 2010, the growth in British Columbia's GDP has simmered
down. In 2012 and 2013, the province's GDP grew 1.7% and 1.5% respectively,
down from the growth of 2.6% recorded in 2011. Several factors are contributing
to the cooling down of the provincial economy, including weaker Asian exports, a
softening housing market, and the still modest growth that is being seen in the
United States. The new home market took a hit in 2012 with the transition from
HST back to GST/PST; however, a grant to first-time buyers of new primary
residences has been instated, which buffered the impact of the new tax structure
on house sales. In addition, the Chinese property market slowed down in 2012 and
2013, which in turn put a damper on British Columbia's forestry exports.
Moving forward, the Province of British Columbia is looking to the liquefied
natural gas (LNG) sector to expand its economy in the long term. The Province has
placed strong emphasis on its proposed LNG strategy, which involves major
investments into infrastructure, including liquefaction facilities and pipelines in
Northern British Columbia.
Canada
Canada’s national economy is projected to expand at a rate of 2.4% in 2014, up
from the level of 1.8% recorded in 2013. The acceleration will result from a
narrowing of the substantial growth disparity among the provinces in 2012 and
2013 rather than a broad-based pickup in the pace. Specifically, it will be renewed
vigour in underperforming provinces of Ontario and British Columbia, and to a
lesser extent Nova Scotia and Quebec, that will drive up growth for the country in
2014.
The Prairie Provinces—the growth leaders since 2010—are expected to continue
to show brisk activity; however, they will contribute little to the quickening of the
pace, with Alberta the only one among them forecasted to accelerate somewhat. In
general, the western part of the country is Canada’s main engine of the expansion.
Starting in 2014, however, the dividing line will shift to between Ontario and
Quebec.
The Canadian dollar has fallen 10% in the past year to a 4-year low. The weaker
dollar and increased US demand are expected to result in export-driven growth,
which should jumpstart business confidence and investment. In 2014, Canadian
July-2014
27
export growth is expected to outpace imports, resulting in the trade sector adding
the most to the economy’s annual growth rate in more than a decade. In contrast,
elevated household debt will restrain consumers, who are now borrowing at the
slowest pace in three decades. Fiscal policy will also remain moderately restrictive,
with many provinces still cutting back and the federal government flirting with a
possible balanced budget in the upcoming fiscal year. The unemployment rate
should decline modestly to 7.0% by year-end.
The prospects for the long term are quite favourable as a result of ongoing
investments to further develop the country's large and varied national resource
base. Internationally competitive business tax rates, ongoing capital and
immigration inflows, and a lower government debt burden relative to the recent
past are also helping to provide a more supportive economic environment.
Economic and
Demographic Review
Based on the fieldwork that we conducted in the area and our in-house sources,
we have evaluated various economic and demographic statistics to determine
trends in lodging demand. FP Markets – Canadian Demographics 2012 and
SuperDemographics 2013 are the primary sources for the economic and
demographic statistics used in this analysis.
Population
Population changes are an economic trend that often reflects business activity and
lodging demand, although there is no direct correlation between an area's
population size and specific level of transient visitation. A review of an area's
historical and projected population trends and composition is an important step in
evaluating the local economic climate and projecting growth in demand for lodging
facilities. An expanding area population suggests both an increasing commercial
base and growth in room night demand attributable to relocations. In addition, an
increase in the local resident base indicates a rise in the number of leisure
travellers arriving in the area, as the motivation behind many trips is to visit
friends and relatives. The rate of population growth will generally establish a
minimum rate of increase in the lodging demand of an area.
According to Statistics Canada, the population of Vanderhoof was 4,480 in 2011.
Average Household Income
According to the procedures outlined in National Income and Product Accounts,
average household income is calculated by summing earned income (wages,
salaries, other labour income, and proprietor's income), non-earned income, and
July-2014
28
residence adjustments for each income earner in a household. Personal
contributions to social insurance are then subtracted. Trends in household income
reflect the spending ability of local residents.
The average household income in Vanderhoof was $50,872 in 2012, which is lower
than the estimated national average of $86,935 per household for the same year.
Major Business and
Industry
Providing additional context for understanding the nature of the regional
economy, the following table presents a list of the major employers in the subject
property’s market.
FIGURE 5-2
Rank
1
2
3
4
5
6
7
8
9
10
MAJOR EMPLOYERS IN DISTRICT OF VANDERHOOF
Firm
School District #91
Canfor-Plateau Mills Division
L & M Lumber, Nechako Lumber, Premium Pellet
St. John Hospital
Vanderhoof Co-op
Ministry of Forests, BC Timber Sales
Vanderhoof Specialty Wood Products
Nechako Valley Community Services Society, Riverside Place
Gulbranson Logging
BID Construction
Number of
Employees
540
300
200
200
117
72
70
70
65
45
Source: District of Vanderhoof
The following bullet points highlight the major demand generators for this market:

July-2014
Mineral exploration is a major component to the economic vitality of
Vanderhoof. There are currently two large operating mines in the BulkleyNechako region: the Endako Mine and the Huckleberry Mine. The Endako Mine
is approximately 95 kilometres west of Vanderhoof and is a primary, surface
molybdenum mine that began its operations in 1965. In 2012, the mine was
expanded which included the construction of a new mill designed to meet oreprocessing capacity of 55,000 tons per day. The Huckleberry Mine, located
approximately 120 kilometres south of Houston is a copper mining operation.
From the beginning of operations through to 2010, the mine’s aggregate
production has included 870 million pounds of copper and eight million
pounds of molybdenum. In 2012, the mine received approval for the Main
Zone Optimization (MZO) Expansion Project. With this expansion plan,
29
production from 2011 to 2021 is estimated to include 424 million pounds of
copper, while adding 70 new positions and preserving 230 positions. Also
noteworthy is ThompsonCreek Metals Mt. Milligan Mine. Mt. Milligan is a
copper and gold mine located approximately 154 kilometres north of
Vanderhoof. The Mt. Milligan Mine is a conventional truck-shovel open pit
mine and 60,000 tonnes per day copper flotation concentrator. The phased
start-up commenced on August 15, 2013, followed by the first production of
copper-gold concentrate in September 2013. The mine achieved commercial
production in February, 2014. The ramp-up continues to progress with mine
pit grades as expected, metal recoveries in the mill above expectations and mill
throughput steadily improving. New Gold’s Blackwater project, a proposed
gold and silver mine 110 kilometres southwest of Vanderhoof will be the
highlight amongst the rapidly increasing natural resource development within
the region. Anticipated to be the largest gold mine west of Ontario, the facility
will produce more than 500,000 ounces of gold and nearly 240,000 ounces of
silver. The proposed project is currently undergoing environmental
assessments with construction slated for 2017, and production to start in
2019. The completed mine is estimated to produce approximately 600 jobs
during construction.
July-2014

Forestry contributes approximately 40% of the total community income in the
Vanderhoof area. Three large wood processing facilities operate out of
Vanderhoof including L&M Lumber, Canfor’s Pleateau lumber mill, and
Premium Pellet. Forest activity in Vanderhoof is largely connected to timber
harvested in the Crown land base in the Prince George Timber Supply Area
(TSA). The TSA’s current allowable cut is 12.5 million cubic metres.
Anticipation for a wood supply shortage in the region is largely attributed to
the mountain pine beetle infestation that has damaged forestry in Western
Canada, accompanied by increasing activity of forest wildfires. It is expected
that if the available wood supply is not sufficient to meet the demand of local
mills, the results could include downsizing or closures.

Vanderhoof was established as one of the first agricultural settlements in
British Columbia nearly 100 years ago. Today, the city’s economy flourishes in
attribution to the agricultural development throughout the Nechako Valley.
This region has become one of the largest forage producing areas in British
Columbia due to its large forage capacity and inexpensive agricultural land.
Local agricultural production comprises crops, barley, oats, and livestock.

In response to a declining population of the endangered white surgeon in the
Nechako River, a new hatchery conservation area was recently constructed on
the banks of the river in Vanderhoof. The number of white surgeon has
dwindled over the past few decades, and the Nechako species was declared
endangered in 2003. Construction of the $5.5-million conservation centre
30
began in early 2013 and became fully operational in the spring of 2014. The
centre is owned and operated by the Freshwater Fisheries Society of BC, and it
has received funding from the Province, Rio Tinto Alcan, and the District of
Vanderhoof. Funding of nearly $4.5-million will be needed to operate the
facility over the next ten years. In an attempt to rebuild the population, the
facility hopes to release up to 12,000 sturgeon into the river annually.

Proposed LNG
Pipelines
The District of Vanderhoof has been built on generations of forestry and
agriculture. However, as the community foresees decreases in its lumber
production, mining is anticipated to lead the charge. As the local resource
industry continues to develop, particularly through new mineral deposits, the
population of Vanderhoof is expected to increase in the next decade. The
community is poised for growth and the economic outlook for Vanderhoof
remains optimistic.
In response to the high demand and lucrative market for liquefied natural gas
(LNG), the BC government has taken steps to build an LNG industry. Rapid
economic growth in overseas markets such as Asia is expected to attract new
capital and foreign investment into the industry, as well as develop a large LNG
export market. Although projects are still waiting to be approved, the BC
government is committed to having three LNG facilities in operation by 2020.
According to the BC government, these LNG projects would provide over $20billion in direct new investment and create as many as 9,000 new construction
jobs, 800 long-term jobs, and thousands of potential spin off jobs.
There are currently three proposed LNG projects that would run through
Vanderhoof to reach Kitimat. These projects may directly and indirectly create
hotel room night demand throughout Northwestern BC, including the district of
Vanderhoof.
July-2014

The proposed Kitimat LNG Pacific Trail Pipeline project, owned by both
Chevron Canada and Apache Canada, is projected to cost $4.5-billion and
produce a total of 4,500 jobs. The 480-kilometre route is scheduled to be
operational by 2017 and is being designed to safely and reliably deliver natural
gas from Summit Lake to a liquefied natural gas facility near Kitimat, BC. The
pipeline and the facility are to be built by both Chevron and Apache.

The proposed Pacific Northern Gas Looping project, which will be built by
TransCanada, would upgrade gas transmission capacity by looping an existing
natural gas transmission line between Summit Lake and Kitimat in order to
meet the high demand from existing and new customers. The loop is intended
to run parallel to the existing PNG pipeline between Summit Lake and Telkwa,
as well as between the Lakelse Lake area and Kitimat. The project will be in its
31
initial study phase until 2015, the earliest project commencement date is Q4
2014, and the earliest completion date is 2016. This project is projected to
produce 1,800 to 2,400 direct person years of employment throughout the
construction phase.

The Coastal GasLink project, owned by Shell Canada and Asian Partners, is
projected to cost $4-billion. The tentative completion date is set for the end of
the decade. The project aims to develop a natural gas pipeline along a 700kilometre route from Northeastern BC to the west coast, in order to serve
export markets. The project will also produce 2,000 to 2,500 construction jobs
realized over a three-year construction period. TransCanada Corporation has
been selected by Shell Canada and its partners to design, build, own, and
operate the proposed Coastal GasLink project, while the facility in Kitimat will
be built by Shell and Asian Partners.
These projects will create room night demand in Northwestern BC, mainly during
the years of construction. As the projects mature and reach the point of being
operational, employment on the whole will decrease, but permanent jobs will also
be created to run the facilities moving forward.
As these projects are still in the proposal stage, they are not fully accounted for in
our projected of lodging demand growth in this appraisal. In other words, our
demand projection does not include the upside potential from these major
projects. If approved, they could translate into strong growth in market-wide
commercial demand in the medium to long term.
Unemployment
Statistics
The following table presents historical unemployment rates for the proposed
subject property’s market area.
FIGURE 5-3
UNEMPLOYMENT STATISTICS
Year
North Coast & Nechako
2009
2010
2011
2012
2013
10.6 %
10.2
8.6
10.7
6.6
British Columbia
7.7 %
7.6
7.5
6.7
6.6
Canada
8.3 %
8.0
7.4
7.2
7.1
Source: Statistics Canada
Unemployment rates in the North Coast & Nechako region have fluctuated sharply
in recent years. While the North Coast & Nechako has seen unemployment rates
surpass 10%, the region's latest economic activity drove unemployment down to
6.6% in 2013. The region has seen increases in employment due to the mining
July-2014
32
advancements and recovery in the forestry sector. According to Statistics Canada,
the region is forecasted to slowly decrease its unemployment rate over the next
few years.
Airport Traffic
Airport passenger counts are important indicators of lodging demand. Depending
on the type of service provided by a particular airfield, a sizable percentage of
arriving passengers may require hotel accommodations. Trends showing changes
in passenger counts also reflect local business activity and the overall economic
health of the area.
The Prince George Airport had 426,709 passengers pass through the airport in
2013, a 1.9% increase from the previous year. Canada's two largest carriers,
Westjet and Air Canada, provide direct service from Vancouver to Prince George.
Central Mountain Air and Northern Thunderbird Air connect the North and BC's
interior through scheduled flights and charters. The airport’s most recent
development was its $36-million, 4,000-foot runway extension that became
operational in 2009. As a result, the Prince George Airport is home to the fourth
longest commercial runway in Canada.
The following table illustrates recent operating statistics for the primary airport
facility serving the proposed subject property’s submarket.
FIGURE 5-4
PASSENGER TRAFFIC – PRINCE GEORGE AIRPORT
Year
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Passenger
Traffic
319,166
365,382
394,407
407,300
417,484
376,030
390,340
402,438
418,589
426,709
Percent
Change*
Percent
Change**
—
14.5 %
7.9
3.3
2.5
(9.9)
3.8
3.1
4.0
1.9
—
14.5 %
11.2
8.5
6.9
3.3
3.4
3.4
3.4
3.3
*Annual average compounded percentage change from the previous year
**Annual average compounded percentage change from first year of data
Source: Prince George Airport
July-2014
33
The major projects in the province of British Columbia are published annually. The
following table lists the major projects for Vanderhoof, Fort St. James, and Fraser
Lake.
Major Projects
FIGURE 5-5
MAJOR PROJECTS – VANDERHOOF, FORT ST. JAMES, AND FRASER LAKE
Project
Nulki Hills Wind Project
Kenney Dam Cold Water Release Facility
Fraser Lake Sawmill Biomass Project
Fort St. James Green Energy LP
Blackwater Gold Project
Chu Molybdenum Project
Location
Status
Vanderhoof
Vanderhoof
Fraser Lake
Fort St. James
Vanderhoof
Vanderhoof
Proposed
Proposed
Proposed
Proposed
Review
On Hold
Est. Cost ($ Millions)
$45
275
20
235
1,800
1,040
Total Estimated Cost
Start
Finish
2015
─
─
2014
─
─
2017
─
─
2016
─
─
$3,415
Source: BC Major Project Inventory - December 2013
The majority of the projects in the area are related to the energy and mining
sectors. The total value of the major projects in the pipeline for the area is over $3billion. In addition, the proposed LNG pipelines, which originate and conclude in
markets other than the ones highlighted above, will further contribute to the
optimism in the market due to the anticipated labour requirements proximate to
Vanderhoof. The outlook for this market going forward is thus positive.
Travel Market
Intentions
Travel market intentions are a strong indicator of lodging demand in Canada. The
trend data compiled by the Conference Board of Canada and the Canadian Tourism
Research Council show the changes in overnight travel within both provincial and
metropolitan markets. The data are then segmented according to traveller type
and origin. The changes that occur in overnight travel have a direct relationship
with specific types of lodging demand in the proposed subject property’s market.
Along with total travel expenditures, the following table summarizes the overnight
travel forecasts for the province compared to national expectations.
July-2014
34
FIGURE 5-6
OVERNIGHT VISIT FORECASTS – NATIONAL & PROVINCIAL
Overnight Travel Forecasts (% Change)
Avg Annual %
Change
2013f
2014f
2015f
2016f
2017f
Canada
Domestic
Business
Pleasure
United States
Overseas
Total
Total Expenditures (millions)
1.4 %
1.5
1.4
1.2
1.6
1.4
$43,032
2.2 %
2.4
2.3
2.1
2.6
2.2
$45,120
2.7 %
2.6
3.0
2.3
3.2
2.7
$47,532
2.3 %
2.6
2.3
1.5
3.5
2.3
$49,818
2.8 %
2.6
3.2
1.8
4.4
2.8
$52,510
2.3 %
2.3
2.4
1.8
3.1
2.3
5.1
British Columbia
Domestic
Business
Pleasure
United States
Overseas
Total
Total Expenditures (millions)
1.3 %
-0.2
1.5
4.7
2.9
2.0
$9,135
2.5 %
2.8
2.6
1.7
3.6
2.4
$9,593
2.8 %
3.3
2.9
1.9
4.1
2.8
$10,134
2.8 %
2.9
2.9
1.6
4.3
2.7
$10,669
2.6 %
2.4
2.6
1.3
4.5
2.5
$11,208
2.4 %
2.2
2.5
2.2
3.9
2.5
5.2
Source: Conference Board of Canada Travel Market Outlook, Autumn 2013: National Focus
Domestic travel in Canada was weak in the first half of 2013. This was largely due
to soft consumer confidence and concerns about employment prospects. The latter
half of the year was more positive with consumer confidence strengthening
modestly and improving global economic conditions. Overseas and US travel were
also subdued through 2013 with a lack of growth from key European markets and
a slow start to the expected travel increases from emerging market economies
such as China, India, and Brazil. US travel is also expected to see improvement in
the medium and long term as the US dollar strengthens and the US economy
improves after relatively sluggish growth, which was the result of the tough
austerity measures implemented early in the year.
Tourism activity in British Columbia normalized in 2011 following the year of the
Olympics in 2010, when there was a surge in overnight visitation. Overall tourism
activity improved in 2012 and 2013, albeit at a more modest rate. Looking
forward, the total number of overnight visits is forecasted to grow by healthy rates
in the long term. The most significant growth is expected to be seen in overseas
travellers over the next three years, with expected increases in travellers from
Asia, South America, and Mexico offsetting weakened travel from Europe. US
visitation is expected to make a comeback aided by strong projected increases in
cruise ship activity. Domestic tourism should also get a boost from the strong
economic growth in Alberta and Saskatchewan over the near term.
July-2014
35
Tourist Attractions
Conclusion
July-2014
The market benefits from a variety of tourist and leisure attractions in the area.
The peak season for tourism in this area is from May to September. During other
times of the year, weekend demand comprises travelers passing through en route
to other destinations. Primary attractions in the area include the following:

The Migratory Bird Sanctuary is located on the Nechako River at Riverside
Park and is largely the stopping grounds for Canada Geese and many other
species of birds including Trumpeter Swans, Northern Pintails, Caspian Terns,
and White Pelicans. The grounds offer excellent viewpoints for avid
birdwatchers and wildlife photographers. The spring and fall seasons feature
the highest diversity of birds, while in the summer, birdwatchers will be in the
company of other rare species including song birds, water fowl, and shore
birds.

Nechako Valley offers a variety of outdoor recreational opportunities found
especially in Vanderhoof. The area offers a variety of trails devoted to hikers,
bikers, and wildlife enthusiasts. Hundreds of pristine lakes and streams create
ample game fishing and fly-fishing opportunities. The Nechako River is
accessible for motor boats, canoes, and kayaks in the summer, while tourist
can enjoy ice fishing in the river come winter.

Vanderhoof's rich history is showcased at the Vanderhoof Community
Museum. The museum features guided tours where visitors can learn about
historic local personalities and sites, as well as the early days of the railway
and exploration in the north. The facility comprises restored 1900's buildings,
a restaurant, a gift shop, and a heritage park.

Vanderhoof is at the geographical centre of the province featuring immaculate
mountains, rivers, and lakes. These nature-filled attributes draw in consistent
leisure demand on an annual-basis.
Overall, Vanderhoof is well positioned for strong growth in the coming years with
the major investment activity in and around the region. British Columbia's north
is the stage for significant natural gas and oil infrastructure investment in the
form of pipelines and exportation. While forestry has experienced a decline over
the decades, this sector continues to provide a stable economic base for the
community. The proposed mining activity in the area, along with the established
economic drivers, position the market well for future growth.
36
6. Supply and Demand Analysis
In the lodging industry, price varies directly, but not proportionately, with demand
and inversely, but not proportionately, with supply. Supply is measured by the
number of guestrooms available, and demand is measured by the number of
rooms occupied. The net effect of supply and demand toward equilibrium results
in a prevailing price, or average rate. The purpose of this section is to investigate
current supply and demand trends, as indicated by the current competitive
market, in order to set forth a basis for the projection of future supply and demand
growth.
Definition of Subject
Hotel Market
The 80-room Proposed Limited-Service Hotel will be located in Vanderhoof,
British Columbia. The proposed subject property is expected to compete with a set
of hotels based on various factors, which may include location, price point, product
quality, length of stay (such as an extended-stay focus vs. non-extended-stay
focus), room type (all-suite vs. standard), hotel age, or brand, among other factors.
We have reviewed these pertinent attributes and established an expected
competitive set based upon this review. Our review of the proposed subject
property’s specific competitive set within the Vanderhoof area begins after our
review of national occupancy, average rate, and RevPAR trends.
National and Provincial
Trends Overview
The proposed subject property’s local lodging market is most directly affected by
the supply and demand trends within the immediate area; however, individual
markets are also influenced by conditions in the national lodging market. We have
reviewed national lodging trends to provide a context for the forecast of the supply
and demand for the proposed subject property’s competitive set.
The following graphs present annual hotel occupancy and average rate data for
Canada since 2005 and the percentage change in supply and demand. These
statistics come from Smith Travel Research (STR), an independent research firm
that compiles and publishes data on the lodging industry.
July-2014
37
FIGURE 6-1
NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS
$145
66%
$135
64%
$133
$133
$129
$125
$126
$124
$115
$129
$128
$130
$126
$129
$120
62%
60%
$105
58%
$95
56%
$85
54%
$84
$75
$85
$84
$80
$79
$78
$76
$81
52%
$74
$74
$71
$65
50%
2005
2006
2007
2008
2009
Average Rate ($)
July-2014
2010
2011
RevPAR ($)
2012
2013
April 2013 April 2014
Occupancy (%)
38
FIGURE 6-2
CHANGE IN NATIONAL SUPPLY AND DEMAND OF ROOMS
5.0%
66.0%
4.8%
65.0%
3.0%
3.0%
64.0%
2.9%
2.1%
1.9%
1.2%
1.5%
1.5%
1.3%
1.1%
63.0%
1.6%
1.2%
0.5%
0.5%
-0.6%
62.0%
61.0%
-1.0%
60.0%
Occupancy
% Change
1.0%
59.0%
-3.0%
58.0%
57.0%
-5.0%
56.0%
-6.4%
-7.0%
55.0%
Available Room Nights
Occupied Room Nights
Occupancy (%)
The national hotel market is in a healthy position. In 2013, the market noted
record demand levels and a RevPAR on par with 2008, the prior peak in the
performance cycle. Demand has grown for each of the last four years, and the
outlook for 2014 continues to be positive. In 2014, the Conference Board of
Canada is forecasting GDP growth for the country at 2.4%, and the Canadian
Tourism Research Institute anticipates that overnight visitation will increase by
2.2%. Both statistics bode well for another year of hotel demand growth.
The conservatism of Canada’s banking sector has generally kept supply growth in
check over the past eight years. In both 2012 and 2013, the supply increased by
only 0.5%, well below the historical average of 1.1%. The positive demand trends
coupled with the limited amount of new supply have allowed the national
occupancy level to rebound, although it has yet to return to the peak of 65.2%
noted in 2007. The national average room rate grew by 2.1% in 2013, which is
slightly greater than inflationary levels, and has now reached a new record for the
country, just slightly above the prior peak recorded in 2008. Although the RevPAR
for the country as a whole decreased in only one of the last eight years, the
July-2014
39
magnitude of that decline was so substantial that RevPAR took four years of
growth to return to a comparable level recorded at the prior peak. Nevertheless,
the trends established in the last few years indicate that the market continues to
move in a positive direction.
FIGURE 6-3
BRITISH COLUMBIA OCCUPANCY AVERAGE RATE TRENDS
$155
64%
$145
62%
$144
$135
$125
$136
$134
$135
$138
60%
$133
$128
58%
$115
56%
$105
54%
$95
52%
$85
$75
$87
$82
$82
$80
$86
50%
$74
$65
$67
$55
48%
46%
2009
2010
2011
2012
Average Rate ($)
RevPAR ($)
2013
April 2013
April 2014
Occupancy (%)
British Columbia showed strong RevPAR growth in 2010, largely as a result of the
strong rate increases achieved during the Winter Olympic and Paralympic Games
in Vancouver. As expected, the RevPAR declined in 2011 as the ADR normalized to
pre-Olympic levels. Contrary to expectations, however, the occupancy level
remained relatively stable. The province-wide RevPAR held steady in 2012, but it
rose approximately 5% in 2013 with the renewed activity in resource-specific
markets in the North. The year-to-date through April comparative period indicates
that the BC lodging market is seeing strong growth in both occupancy and ADR
this year.
SUPPLY
July-2014
Based on our evaluation of the occupancy, rate structure, market orientation, chain
affiliation, location, facilities, amenities, reputation, and quality of each area hotel,
as well as the comments of management representatives, we have identified four
properties that are expected to be primarily competitive with the Proposed
Limited-Service Hotel. Additional lodging facilities are judged only secondarily
40
competitive. Although the facilities, rate structures, or market orientations of these
hotels prevent their inclusion among the primary competitive supply, they are
expected to compete with the proposed subject hotel to some extent.
The following table summarizes the important operating characteristics of the
future primary competitors and the aggregate of the weighted secondary
competitors. This information was compiled from personal interviews,
inspections, lodging directories, and our in-house library of operating data. The
table also sets forth each property’s penetration factors. Penetration is the ratio
between a specific hotel’s operating results and the corresponding data for the
market. If the penetration factor is greater than 100%, the property is performing
better than the market as a whole. Conversely, if the penetration is less than 100%,
the hotel is performing at a level below the market-wide average.
July-2014
41
FIGURE 6-4
PRIMARY COMPETITORS – OPERATING PERFORMANCE
Hillview Motel
Coach Light Motel
North Country Inn
Siesta Motel
ed-St
ay
Estimated 2011
Exten
d
Leisu
re
ing a
nd
Gr o u
p
Number
of Rooms
Meet
Property
Comm
ercia
l
Est. Segmentation
Weighted
Annual
Room
Count
Occ.
Estimated 2012
Average
Rate
RevPAR
Weighted
Annual
Room
Count
Estimated 2013
Occ.
Average
Rate
RevPAR
Weighted
Annual
Room
Count
Occ.
Average
Rate
RevPAR
RevPAR
Change
Occupancy
Yield
Penetration Penetration
38
12
37
14
30 %
30
30
35
5%
0
5
0
5%
5
25
20
60 %
65
40
45
38
12
37
14
60 %
60
75
65
$70.00
72.00
100.00
80.00
$42.00
43.20
75.00
52.00
38
12
37
14
65 %
67
77
67
$75.00
75.00
100.00
85.00
$48.75
50.25
77.00
56.95
38
12
37
14
65 %
67
80
72
$75.00
75.00
105.00
80.00
$48.75
50.25
84.00
57.60
0.0 %
0.0
9.1
1.1
90.4 %
93.2
111.2
100.1
76.9 %
79.3
132.5
90.9
Sub-Totals/Averages
101
31 %
4%
15 %
50 %
101
66.2 %
$84.03
$55.62
101
69.9 %
$86.42
$60.41
101
71.7 %
$87.96
$63.07
4.4 %
99.7 %
99.5 %
Secondary Competitors
127
26 %
4%
25 %
45 %
47
67.5 %
$77.83
$52.56
47
72.5 %
$80.79
$58.60
56
72.3 %
$88.42
$63.92
9.1 %
100.5 %
100.9 %
Totals/Averages
228
29 %
4%
19 %
48 %
148
66.6 %
$82.05
$54.65
148
70.7 %
$84.60
$59.84
157
71.9 %
$88.12
$63.37
5.9 %
100.0 %
100.0 %
July-2014
42
The following map illustrates the location of the proposed subject property and its
future competitors.
MAP OF COMPETITION
Our survey of the primarily competitive hotels in the local market shows a range of
lodging types and facilities. Each primary competitor was inspected and evaluated.
Descriptions of our findings are presented below.
July-2014
43
PRIMARY COMPETITOR #1 - HILLVIEW MOTEL
Hillview Motel
1533 Highway 16 East
Vanderhoof, BC
FIGURE 6-5
ESTIMATED HISTORICAL OPERATING STATISTICS
Year
Estimated 2011
Estimated 2012
Estimated 2013
Wtd. Annual
Room Count Occupancy
38
38
38
60 %
65
65
Average
Rate
$70
75
75
RevPAR
$42
49
49
Occupancy
Penetration
90.1 %
91.9
90.4
Yield
Penetration
76.8 %
81.5
76.9
The Hillview Motel in independently owned and operated. The facility features an
on-site restaurant, and standard guestrooms that each feature a microwave, a
refrigerator, and a coffee maker. The hotel is somewhat disadvantaged by its
outdated facility, but benefits from its excellent accessibility and visibility from
Highway 16.
July-2014
44
PRIMARY COMPETITOR #2 - COACH LIGHT MOTEL
Coach Light Motel
1938 Highway 16
Vanderhoof, BC
FIGURE 6-6
Year
Estimated 2011
Estimated 2012
Estimated 2013
Wtd. Annual
12
12
12
60 %
67
67
Average
Rate
$72
75
75
RevPAR
$43
50
50
Occupancy
Penetration
90.1 %
94.7
93.2
Yield
Penetration
79.0 %
84.0
79.3
The Coach Light Motel is located south of the subject site adjacent to Highway 16.
The facility is independently owned and operated and features the standard
amenities of a limited-service hotel. The hotel has standard units and kitchen units
available. Standard rooms come complete with a refrigerator, a microwave, and a
coffeemaker, while kitchen units feature amenities that of a standard room,
accompanied by a two-head stove, a sink, and cookware. Additionally, the facility
offers 8 full-service RV lots. The Coach Light Motel is disadvantaged by its
outdated, exterior corridor facility, however, the facility is advantageously situated
adjacent to Vanderhoof's primary thoroughfare.
July-2014
45
PRIMARY COMPETITOR #3 - NORTH COUNTRY INN
North Country Inn
2645 Burrard Avenue
Vanderhoof, BC
FIGURE 6-7
Year
Estimated 2011
Estimated 2012
Estimated 2013
Wtd. Annual
37
37
37
75 %
77
80
Average
Rate
$100
100
105
RevPAR
$75
77
84
Occupancy
Penetration
112.6 %
108.9
111.2
Yield
Penetration
137.2 %
128.7
132.5
The North Country Inn is the only property in the competitive set situated in
Vanderhoof's downtown core and is within immediate walking distance of various
shops and parks. The four-building, exterior-corridor facility is family owned and
operated and features standard and suite-style guestrooms, and an on-site
restaurant. The Inn opened in 1984, and was expanded in 2011 with the addition
of another building comprised of 10 deluxe suites.
July-2014
46
PRIMARY COMPETITOR #4 - SIESTA MOTEL
Siesta Motel
230 1st Street W
Vanderhoof, BC
FIGURE 6-8
Year
Estimated 2011
Estimated 2012
Estimated 2013
Wtd. Annual
14
14
14
65 %
67
72
Average
Rate
$80
85
80
RevPAR
$52
57
58
Occupancy
Penetration
97.6 %
94.7
100.1
Yield
Penetration
95.1 %
95.2
90.9
The Siesta Motel is independently owned and operated. The facility features
standard guestroom with amenities expected of a limited-service hotel including
complimentary wireless internet, an in-room coffee maker, a television, as well as
a microwave and refrigerator. Located along Highway 16, the facility has good
accessibility and visibility.
July-2014
47
Secondary
Competitors
July-2014
We have also reviewed other area lodging facilities to determine whether any may
compete with the proposed subject hotel on a secondary basis. The room count of
each secondary competitor has been weighted based on its assumed degree of
competitiveness in the future with the proposed subject hotel. By assigning
degrees of competitiveness, we can assess how the proposed subject hotel and its
future competitors may react to various changes in the market, including new
supply, changes to demand generators, and renovations or franchise changes of
existing supply. The following table sets forth the pertinent operating
characteristics of the secondary competitors.
Proposed Limited-Service Hotel –Vanderhoof, British Columbia - Canada
48
FIGURE 6-9
SECONDARY COMPETITORS – OPERATING PERFORMANCE
Chundoo Motor Inn
New Caledonia Motel
Pikta Bay Resort Fort St. James
Stuart Lodge Fort St. James
The View Hotel
Totals/Averages
July-2014
Exten
dedStay
re
Leisu
ing a
nd
Grou
p
Number
of Rooms
Meet
Property
Comm
ercia
l
Est. Segmentation
Estimated 2011
Weighted
Total
Annual
Competitive Room
Level
Count
Occ.
Estimated 2012
Average
Rate
RevPAR
Weighted
Annual
Room
Count
Occ.
Estimated 2013
Average
Rate
RevPAR
Weighted
Annual
Room
Count
Occ.
Average
Rate
RevPAR
36
38
14
5
34
20 %
20
5
5
65
5 % 25 % 50 %
5
25
50
0
50
45
0
50
45
5
5
25
50 %
50
50
50
50
18
19
7
3
0
65 %
75
60
50
0
$70.00
83.00
80.00
85.00
0.00
$45.50
62.25
48.00
42.50
0.00
18
19
7
3
0
70 %
80
65
55
0
$75.00
85.00
80.00
90.00
0.00
$52.50
68.00
52.00
49.50
0.00
18
19
7
3
10
70 %
80
60
50
76
$78.00
85.00
80.00
90.00
117.00
$54.60
68.00
48.00
45.00
88.92
127
26 %
4 % 25 % 45 %
50 %
47
67.5 %
$77.83
$52.56
47
72.5 %
$80.79
$58.60
56
72.3 %
$88.42
$63.92
49
We have identified five hotels that are expected to compete with the proposed
subject hotel on a secondary level. These properties are located in Fort St. James,
which is located approximately sixty kilometres to the north of Vanderhoof. These
hotels will compete with the subject hotel for commercial and extended-stay
demand in the area, however the location will make this set of hotels
approximately 50% competitive with the Vanderhoof market.
Supply Changes
It is important to consider any new hotels that may have an impact on the
proposed subject hotel’s operating performance. The new supply that is
considered competitive in our analysis is presented in the following tables.
FIGURE 6-10 NEW SUPPLY
Total
Number
of Rooms
Proposed Property
80
Totals/Averages
Competitive
Level
100 %
80
Weighted
Room
Count
80
Estimated
Opening Date
January 1, 2017
Developer
Speculative
Development Stage
Early Development
80
FIGURE 6-11 NEW SUPPLY
Expanding Property
The View Hotel
Totals/Averages
Room
Count
Change
28
28
Total
Competitive Weighted
Level
Room Count
50 %
14
Opening Date
July 1, 2014
Developer
The View Hotel
Development Stage
Under Construction
14
The proposed subject hotel is the only hotel project being considered for
development in the district at this time. The View Hotel is currently undergoing an
expansion that will see 28 rooms added to the property. Construction is underway,
and the new rooms are expected to enter the market this summer.
We have taken reasonable steps to investigate proposed hotel projects and their
status, but because of the nature of real estate development it is impossible to
determine with certainty every hotel that will be opened in the future or what
their marketing strategies and effect in the market will be. Depending on the
outcome of current and future projects, the future operating potential of the
proposed subject property may be positively or negatively affected. Future
July-2014
50
improvement in market conditions will raise the risk of increased competition. Our
forthcoming forecast of stabilized occupancy and average rate is intended to
reflect this risk.
Supply Conclusion
We have identified various properties that are expected to be competitive with the
proposed subject property. We have also investigated potential increases in the
competitive supply in this submarket of Vanderhoof. The Proposed LimitedService Hotel should enter a dynamic market of varying product types and price
points. Next, we present our forecast for demand change, using the historical
supply data as a starting point.
DEMAND
The following table presents the most recent trends for the subject hotel market as
tracked by HVS. These data pertain to the competitors discussed previously in this
section. The performance results are estimated, rounded, and weighted for
competitive level.
FIGURE 6-12 HISTORICAL MARKET TRENDS
Year
Accommodated
Room Nights
Est. 2011
Est. 2012
Est. 2013
35,861
38,082
41,334
Avg. Annual Compounded
Chg., Est. 2011-Est. 2013:
Demand Analysis
Using Market
Segmentation
July-2014
% Change
—
6.2 %
8.5
7.4 %
Room Nights
Available
53,838
53,838
57,476
% Change
—
0.0 %
6.8
3.3 %
Market
Occupancy
66.6 %
70.7
71.9
Market ADR
$82.05
84.60
88.12
% Change
Market
RevPAR
% Change
—
3.1 %
4.2
$54.65
59.84
63.37
—
9.5 %
5.9
3.6 %
7.7 %
For the purpose of demand analysis, the overall market is divided into individual
segments based on the nature of travel. Based on our fieldwork, area analysis, and
knowledge of the local lodging market, we estimate the distribution of
accommodated-room-night demand in 2013 as follows.
51
FIGURE 6-13 ACCOMMODATED ROOM NIGHT DEMAND (2013)
Market Segment
Marketwide
Accommodated Percentage
Demand
of Total
Commercial
Meeting and Group
Leisure
Extended-Stay
12,040
1,637
7,704
19,954
29 %
4
19
48
Total
41,334
100 %
Using the distribution of accommodated hotel demand as a starting point, we will
analyze the characteristics of each market segment in an effort to determine future
trends in room-night demand.
Commercial Segment
Commercial demand consists mainly of individual businesspeople passing through
the subject market or visiting area businesses, in addition to high-volume
corporate accounts generated by local firms. Brand loyalty (particularly frequenttraveler programs), as well as location and convenience with respect to businesses
and amenities, influence lodging choices in this segment. Companies typically
designate hotels as “preferred” accommodations in return for more favorable
rates, which are discounted in proportion to the number of room nights produced
by a commercial client. Commercial demand is strongest Monday through
Thursday nights, declines significantly on Friday and Saturday, and increases
somewhat on Sunday night. It is relatively constant throughout the year, with
marginal declines in late December and during other holiday periods.
Commercial demand in Vanderhoof is tied to the resource-based economy. In
particular, forestry, agriculture, and mining generate the largest amount of
commercial room nights in the market. Various corporations, including Conifex,
Canfor, BC Hydro, the Ministry of Forests, Terrane Metals Corp., and Apollo
Forestry Products, generate commercial demand in the proposed subject
property's market. In 2014, exploration for Blackwater’s proposed mine will
commence, which is expected to generate strong commercial demand for the
market. In addition, the province is reviewing several major liquefied natural gas
(LNG) projects that are proposed for development in the area. If approved, these
pipeline projects could further strengthen commercial demand in the future
however the projection does not account for the upside potential from these
July-2014
52
projects because they are speculative at this point. Considering both current and
historical trends, commercial demand is projected to grow 5.0% in 2014, 4.0% in
both 2015 and 2016, and 2.0% in each year thereafter.
Meeting and Group
Segment
The meeting and group market includes meetings, seminars, conventions, trade
association shows, and similar gatherings of ten or more people. Peak convention
demand typically occurs in the spring and fall. Although there are numerous
classifications within the meeting and group segment, the primary categories
considered in this analysis are corporate groups, associations, and SMERFE (social,
military, ethnic, religious, fraternal, and educational) groups. Corporate groups
typically meet during the business week, most commonly in the spring and fall
months. These groups tend to be the most profitable for hotels, as they typically
pay higher rates and usually generate ancillary revenues including food and
beverage and/or banquet revenue. SMERFE groups are typically price-sensitive
and tend to meet on weekends and during the summer months or holiday season,
when greater discounts are usually available; these groups generate limited
ancillary revenues. Association demand is generally divided on a geographical
basis, with national, regional, and state associations representing the most
common sources. Professional associations and/or those supported by members'
employers often meet on weekdays, while other associations prefer to hold events
on weekends. The profile and revenue potential of associations varies depending
on the group and the purpose of the meeting or event.
Meeting and group demand represents a relatively small component of the
Vanderhoof market. In the base year, meeting and group demand accounted for
only 4% of the total number of occupied room nights in the market. In the subject
market, the same major employers that contribute high-volume corporate
accounts generate most corporate group activity. This demand takes the form of
training programs, sales meetings, division conferences, and similar events with a
business purpose. These corporate groups generally meet during Monday through
Thursday nights. The average length of stay is two to four days, although training
groups can stay as long as six nights or more. A similar portion of meeting and
group demand in the market is associated with SMERFE-related sources, in the
form of weddings, local functions, and concerts. In addition, Vanderhoof plays host
to various sports tournaments throughout the year.
In 2014, Vanderhoof will host the Minerals North Conference, which is expected to
boost group demand levels. If built, the proposed aquatic centre could spur further
group demand in the market. Considering both current and historical trends,
meeting and group demand is projected to grow 6.0% in 2014 and 2.0% in each
year thereafter.
July-2014
53
Leisure Segment
Leisure demand consists of individuals and families spending time in an area or
passing through en route to other destinations. Travel purposes include
sightseeing, recreation, or visiting friends and relatives. Leisure demand also
includes room nights booked through Internet sites such as Expedia, Hotels.com,
and Priceline; however, leisure may not be the purpose of the stay. This demand
may also include business travelers and group and convention attendees who use
these channels to take advantage of any discounts that may be available on these
sites. Leisure demand is strongest Friday and Saturday nights, and all week during
holiday periods and the summer months. These peak periods represent the
inverse of commercial visitation trends, underscoring the stabilizing effect of
capturing weekend and summer tourist travel. Future leisure demand is related to
the overall economic health of the region and the nation. Trends showing changes
in state and regional unemployment and disposable personal income correlate
strongly with leisure travel levels.
Vanderhoof has not historically been a tourist-oriented market, although efforts
are being made to strengthen local tourism. The various retail stores and
entertainment venues in the market draw weekend demand from surrounding
communities. Leisure demand within the market is also generated by the
attractions mentioned earlier in this report, including transient travellers heading
north for vacation. As mentioned previously, the sturgeon conservation area was
completed in 2014 and is expected to be a draw for leisure demand in the region.
The growth in this segment is tied directly to the growth of the other demand
segments. Considering both current and historical trends, leisure demand is
projected to grow 2.0% in each projection year.
Extended-Stay
Segment
Extended-stay demand consists of individuals who require accommodations for
more than five nights; typically, the length of stay ranges from ten to fourteen
nights, but can stretch to a month or more. The three principal categories of
extended-stay demand are business-related (typically associated with long-term
projects), family-oriented, and relocation demand. Extended-stay patrons usually
prefer hotels located near shopping centers, restaurants, entertainment venues,
and service-retail uses such as grocery stores, dry cleaners, and fueling stations.
Extended-stay demand tends to trend in line with an area’s corporate expansion
and/or population growth; commercial growth has a direct correlation with
longer-term training activities that may be occurring in the area, while changes in
population typically support related relocation demand. Large-scale construction
projects, prevalent in growing metropolitan areas, also generate significant levels
of extended-stay demand.
In this market, the extended-stay segment comprises forestry and construction
crews that work in the area. The typical length of stay is approximately two to four
weeks, and the rate of double occupancy is fairly high, according to local general
July-2014
54
managers. This demand is strongest in the winter logging season. In 2014,
exploration for Blackwater’s proposed mine will commence, which is expected to
generate strong extended-stay demand for the market. In addition, the province is
reviewing several major LNG projects that are proposed for development in the
area. If approved, these pipeline projects could further strengthen the extendedstay demand in the market going forward. Considering these historical trends,
extended-stay demand is projected to grow 8.0% in 2014, 4.0% in both 2015 and
2016, and 2.0% in each year thereafter.
Conclusion
The purpose of segmenting the lodging market is to define each major type of
demand, identify customer characteristics, and estimate future growth trends.
Starting with an analysis of the local area, four segments were defined as
representing the proposed subject property’s lodging market. Various types of
economic and demographic data were then evaluated to determine their
propensity to reflect changes in hotel demand. Based on this procedure, we
forecast the following base annual growth rates for each demand segment.
FIGURE 6-14 BASE ANNUAL DEMAND GROWTH PROJECTION
Market Segment
2014
2015
Annual Growth Rate
2016
2017
2018
2019
Commercial
Meeting and Group
Leisure
Extended-Stay
5.0 %
6.0
2.0
8.0
4.0 %
2.0
2.0
4.0
4.0 %
2.0
2.0
4.0
2.0 %
2.0
2.0
2.0
2.0 %
2.0
2.0
2.0
2.0 %
2.0
2.0
2.0
Base Demand Growth
5.9 %
3.6 %
3.6 %
2.0 %
2.0 %
2.0 %
Latent Demand
A table presented earlier in this section illustrated the accommodated-room-night
demand in the proposed subject property’s competitive market. Because this
estimate is based on historical occupancy levels, it includes only those hotel rooms
that were used by guests. Latent demand reflects the potential room-night demand
that has not been realized by the existing competitive supply. This type of demand
can be divided into unaccommodated demand and induced demand.
Unaccommodated
Demand
Unaccommodated demand refers to individuals who are unable to secure
accommodations in the market because all the local hotels are filled. These
travellers must defer their trips, settle for less desirable accommodations, or stay
at properties located outside the market area. Because this demand did not yield
occupied room nights, it is not included in the estimate of historical
July-2014
55
accommodated-room-night demand. If additional lodging facilities are expected to
enter the market, it is reasonable to assume that these guests will be able to secure
hotel rooms in the future, and it is therefore necessary to quantify this demand.
Unaccommodated demand is further indicated if the market is at all seasonal with
distinct high and low seasons. Such seasonality indicates that, although the yearend occupancy may not average in excess of 70%, the market sells out many nights
during the year.
The following table presents our estimate of the unaccommodated demand
present in the subject market in the base year.
FIGURE 6-15 UNACCOMMODATED DEMAND ESTIMATE
Accommodated Room
Night Demand
Unaccommodated
Demand Percentage
Commercial
Meeting and Group
Leisure
Extended-Stay
12,040
1,637
7,704
19,954
2.9 %
0.0
0.0
8.4
Total
41,334
4.9 %
Market Segment
Unaccommodated
Room Night Demand
355
0
0
1,676
2,030
Based on our analysis of monthly and weekly peak demand and sell-out trends,
we estimate that the amount of unaccommodated demand in the market in base
year was equal to 4.9% of the demand that was accommodated that year.
Induced Demand
July-2014
Induced demand represents the additional room nights that are expected to be
attracted to the market following the introduction of a new demand generator.
Situations that can result in induced demand include the opening of a new
manufacturing plant, the expansion of a convention centre, or the addition of a
new hotel with a distinctive chain affiliation or unique facilities. The following
table summarizes our estimate of induced demand.
56
FIGURE 6-16 INDUCED DEMAND CALCULATION
Market Segment
Induced Room Nights
2016
2017
2014
2015
Commercial
Meeting and Group
Leisure
Extended-Stay
0
0
0
0
0
0
0
0
747
57
57
287
Total
0
0
1,150
2018
2019
2,193
780
1,021
1,974
2,324
846
1,109
2,127
2,456
912
1,196
2,280
5,968
6,406
6,844
The opening of the new hotel supply is expected to induce demand into the
market. Accordingly, we have incorporated 7,000 room nights (rounded) into our
analysis, phased in over a ramp-up period.
Accommodated
Demand and Marketwide Occupancy
Based on our review of the market dynamics in the proposed subject property’s
competitive environment, we have forecast growth rates for each market segment.
Using the calculated potential demand for the market, we have determined the
market-wide accommodated demand based on the inherent limitations of demand
fluctuations and other factors in the market area.
The following table details our projection of lodging demand growth for the
subject market, including the total number of occupied room nights and any
residual unaccommodated demand in the market.
July-2014
57
FIGURE 6-17 FORECAST OF MARKET-WIDE OCCUPANCY
2013
Commercial
Base Demand
Unaccommodated Demand
Induced Demand
Total Demand
Growth Rate
Meeting and Group
Base Demand
Induced Demand
Total Demand
Growth Rate
Leisure
Base Demand
Induced Demand
Total Demand
Growth Rate
Extended-Stay
Base Demand
Induced Demand
Total Demand
Growth Rate
Totals
Base Demand
Induced Demand
Total Demand
less: Residual Demand
Total Accommodated Demand
Overall Demand Growth
Market Mix
Commercial
Meeting and Group
Leisure
Extended-Stay
Existing Hotel Supply
Proposed Hotels
Available Rooms per Night
2014
2015
2016
2017
2018
2019
12,040
12,642
372
0
13,014
8.1 %
13,148
387
0
13,535
4.0 %
13,674
403
747
14,824
9.5 %
13,947
411
2,193
16,551
11.6 %
14,226
419
2,324
16,969
2.5 %
14,511
427
2,456
17,393
2.5 %
1,637
1,735
0
1,735
6.0 %
1,769
0
1,769
2.0 %
1,805
57
1,862
5.2 %
1,841
780
2,621
40.7 %
1,878
846
2,724
3.9 %
1,915
912
2,827
3.8 %
7,704
7,858
0
7,858
2.0 %
8,015
0
8,015
2.0 %
8,176
57
8,233
2.7 %
8,339
1,021
9,360
13.7 %
8,506
1,109
9,614
2.7 %
8,676
1,196
9,872
2.7 %
19,954
21,550
1,810
0
23,360
17.1 %
22,412
1,882
0
24,294
4.0 %
23,309
1,957
287
25,553
5.2 %
23,775
1,996
1,974
27,745
8.6 %
24,250
2,036
2,127
28,414
2.4 %
24,735
2,077
2,280
29,093
2.4 %
41,334
43,785
2,182
0
45,967
1,878
44,089
6.7 %
45,345
2,269
0
47,614
1,797
45,817
3.9 %
46,963
2,360
1,150
50,472
1,869
48,604
6.1 %
47,902
2,407
5,968
56,277
0
56,277
15.8 %
48,860
2,455
6,406
57,721
0
57,721
2.6 %
49,837
2,504
6,844
59,185
0
59,185
2.5 %
28.3 %
3.8
17.1
50.8
165
28.4 %
3.7
16.8
51.0
165
29.4 %
3.7
16.3
50.6
165
29.4 %
4.7
16.6
49.3
165
29.4 %
4.7
16.7
49.2
165
29.4 %
4.8
16.7
49.2
165
80
80
80
29.1 %
4.0
18.6
48.3
157
¹
57,476
62,619
65,153
65,153
94,353
94,353
94,353
Nights per Year
365
365
365
365
365
365
365
Total Supply
Rooms Supply Growth
157
—
172
8.9 %
179
4.0 %
179
0.0 %
259
44.8 %
259
0.0 %
259
0.0 %
Marketwide Occupancy
71.9 %
70.4 %
70.3 %
74.6 %
59.6 %
61.2 %
62.7 %
¹
A
July-2014
Opening in January 2017 of the 100% competitive, 80-room Proposed Limited-Service Hotel
Change of room count in July 2014 of the 50% competitive, The View Hotel
58
These room-night projections for the market area are used in forecasting the
proposed subject hotel's occupancy and average rate in the following chapter.
July-2014
59
7. Projection of Occupancy and Average Rate
Along with average rate results, the occupancy levels achieved by a hotel are the
foundation of the property's financial performance and market value. Most of a
lodging facility's other revenue sources (such as food, beverages, other operated
departments, and rentals and other income) are driven by the number of guests,
and many expense levels vary with occupancy. To a certain degree, occupancy
attainment can be manipulated by management. For example, hotel operators may
choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an
operating strategy that we believe would be implemented by a typical professional
hotel management team to achieve an optimal mix of occupancy and average rate.
Penetration Rate
Analysis
The proposed subject property's forecasted market share and occupancy levels are
based upon the hotel’s anticipated competitive position within the market as
quantified in the penetration rate. The penetration rate is the ratio of a property's
market share to fair share. A complete discussion of the concept of penetration is
presented in the addenda.
Historical Penetration
Rates by Market
Segment
In the following table, the penetration rates attained by the primary competitors
and the aggregate of the weighted secondary competitors are set forth for each
segment for the base year.
Hillview Motel
Coach Light Motel
North Country Inn
Siesta Motel
Secondary Competition
93 %
96
115
120
91
114 %
0
140
0
110
112 %
125
92
93
93
Ov
era
ll
de
d-S
tay
24 %
25
149
107
133
Ext
en
Co
m
Property
Le i
sur
e
Me
et i
ng
Gro and
up
BASE-YEAR PENETRATION RATES
me
r ci
al
FIGURE 7-1
90 %
93
111
100
101
The Siesta Motel achieved the highest penetration rate in the commercial segment,
the North Country Inn captured the highest penetration rate in both the meeting
and group segment and the leisure segment, and the Coach Light Motel was the
strongest competitor in the extended-stay segment.
July-2014
60
Forecast of Proposed
Subject Property’s
Occupancy
Because the supply and demand balance for the competitive market is dynamic,
there is a circular relationship among the penetration factors of each hotel in the
market. The performance of individual new hotels has a direct effect upon the
aggregate performance of the market and consequently upon the calculated
penetration factor for each hotel in each market segment. The same is true when
the performance of existing hotels changes, either positively (following a
refurbishment, for example) or negatively (as when a poorly maintained or
marketed hotel loses market share).
A hotel’s penetration factor is calculated as its achieved market share of demand
divided by its fair share of demand. Thus, if one hotel’s penetration performance
increases, thereby increasing its achieved market share, this leaves less demand
available in the market for the other hotels to capture, and the penetration
performance of one or more of those other hotels consequently declines (other
things remaining equal). This type of market share adjustment takes place every
time there is a change in supply or a change in the relative penetration
performance of one or more hotels in the competitive market.
Our projections of penetration, demand capture, and occupancy performance for
the proposed subject property account for these types of adjustments to market
share within the defined competitive market.
The following tables set forth, by market segment, the projected adjusted
penetration rates for the proposed subject property and each hotel in the
competitive set.
FIGURE 7-2
COMMERCIAL SEGMENT ADJUSTED PENETRATION RATES
Hotel
Hillview Motel
Coach Light Motel
North Country Inn
Siesta Motel
2013
93 %
96
115
120
91
—
2014
94 %
97
115
121
92
—
2015
94 %
97
116
122
92
—
2016
94 %
97
116
122
92
—
2017
91 %
94
112
118
89
107
2018
2019
87 %
90
107
112
85
117
85 %
87
104
109
83
123
In the commercial segment, the proposed subject hotel is projected to stabilize
capturing more than its fair share of demand. The quality accommodations that
will be offered, as well as the expected regional brand affiliation will assist in
capturing corporate demand in the market. The new, quality product will be
attractive to commercial travellers in the area.
July-2014
61
FIGURE 7-3
MEETING AND GROUP SEGMENT ADJUSTED PENETRATION RATES
Hotel
2013
Hillview Motel
Coach Light Motel
North Country Inn
Siesta Motel
114 %
0
140
0
110
—
2014
113 %
0
139
0
109
—
2015
113 %
0
139
0
109
—
2016
113 %
0
139
0
109
—
2017
125 %
0
153
0
120
76
2018
2019
123 %
0
151
0
118
81
121 %
0
148
0
116
85
The proposed subject property is expected to capture slightly less than its fair
share of meeting and group demand. Nevertheless, the hotel will perform well in
this segment due to its product type, rate, and assumed facilities. The location of
the hotel, proximate to numerous recreational facilities, will make it very
appealing for sports teams and other groups visiting the area.
FIGURE 7-4
LEISURE SEGMENT ADJUSTED PENETRATION RATES
Hotel
Hillview Motel
Coach Light Motel
North Country Inn
Siesta Motel
2013
24 %
25
149
107
133
—
2014
24 %
24
145
105
129
—
2015
23 %
24
144
103
128
—
2016
23 %
24
144
103
128
—
2017
26 %
26
157
113
140
79
2018
2019
25 %
25
152
110
136
87
24 %
25
148
106
131
94
Given the brand affiliation, and expected quality product, the proposed subject
hotel is expected to be a strong performer in the leisure segment. However, the
hotel is expected to stabilize capturing slightly less than its fair share of leisure
demand. The location off of the highway may result in the proposed subject hotel
missing rubber-tire transient traffic driving through Vanderhoof on Highway 16.
In addition, it is assumed the hotel will not offer a pool or a restaurant, which will
contribute to the proposed subject hotel's performance in this segment.
July-2014
62
FIGURE 7-1
EXTENDED-STAY SEGMENT ADJUSTED PENETRATION RATES
Hotel
Hillview Motel
Coach Light Motel
North Country Inn
Siesta Motel
2013
112 %
125
92
93
93
—
2014
113 %
126
93
94
94
—
2015
113 %
126
93
94
94
—
2016
113 %
126
93
94
94
—
2017
2018
111 %
124
91
92
92
104
2019
110 %
122
90
91
91
107
108 %
121
89
90
89
110
As a result of the brand name, and the new product offering, the proposed subject
property will be well positioned to capture more than its fair share of extendedstay demand upon stabilization. Given that extended-stay demand accounts for
50% of the demand accommodated in the market, the strong performance in this
segment will translate into a very strong overall penetration rate for the proposed
subject property.
These positioned segment penetration rates result in the following market
segmentation forecast.
FIGURE 7-5
MARKET SEGMENTATION – PROPOSED SUBJECT PROPERTY
2017
Commercial
Meeting and Group
Leisure
Extended-Stay
Total
2018
2019
32 %
4
13
51
33 %
4
14
50
33 %
4
14
49
100 %
100 %
100 %
The proposed subject hotel's occupancy forecast is set forth as follows. The
adjusted projected penetration rates are used as a basis for calculating the amount
of captured market demand.
July-2014
63
FIGURE 7-6
OCCUPANCY FORECAST – PROPOSED SUBJECT PROPERTY
Market Segment
Commercial
Demand
Market Share
Capture
Penetration
2017
2018
2019
16,551
33.3 %
5,504
107 %
16,969
36.2 %
6,135
117 %
17,393
37.9 %
6,601
123 %
Meeting and Group
Demand
Market Share
Capture
Penetration
2,621
23.7 %
620
76 %
2,724
24.9 %
679
81 %
2,827
26.2 %
740
85 %
Leisure
Demand
Market Share
Capture
Penetration
9,360
24.4 %
2,288
79 %
9,614
26.8 %
2,580
87 %
9,872
29.1 %
2,870
94 %
Extended-Stay
Demand
Market Share
Capture
Penetration
27,745
32.2 %
8,928
104 %
28,414
33.2 %
9,434
107 %
29,093
34.2 %
9,948
110 %
Total Room Nights Captured
17,341
18,828
20,159
Available Room Nights
29,200
29,200
29,200
Subject Occupancy
Marketwide Available Room Nights
Fair Share
59 %
94,353
31 %
Marketwide Occupied Room Nights
56,277
64 %
94,353
31 %
57,721
69 %
94,353
31 %
59,185
Market Share
31 %
33 %
34 %
Marketwide Occupancy
60 %
61 %
63 %
100 %
105 %
110 %
Total Penetration
Based on our analysis of the proposed subject property and the market area, we
have selected a stabilized occupancy level of 69%. The stabilized occupancy is
intended to reflect the anticipated results of the property over its remaining
economic life, given all changes in the lifecycle of the hotel. Thus, the stabilized
occupancy excludes from consideration any abnormal relationship between
supply and demand, as well as any nonrecurring conditions that would result in
July-2014
64
unusually high or low occupancies. Although the proposed subject property may
operate at occupancies above this stabilized level, we believe that it is equally
possible for new competition and temporary economic downturns to force the
occupancy below this selected point of stability.
Average Rate Analysis
One of the most important considerations in estimating the value of a lodging
facility is a supportable forecast of the attainable average rate, which is more
formally defined as the average rate per occupied room. Average rate can be
calculated by dividing the total rooms revenue achieved during a specified period
by the number of rooms sold during the same period. The projected average rate
and the anticipated occupancy percentage are used to forecast rooms revenue,
which in turn provides the basis for estimating most other income and expense
categories.
Competitive Position
Although the average rate analysis presented here follows the occupancy
projection, these two statistics are highly correlated. In reality, one cannot project
occupancy without making specific assumptions regarding average rate. This
relationship is best illustrated by revenue per available room (RevPAR), which
reflects a property's ability to maximize rooms revenue. The following table
summarizes the base-year average rate and RevPAR of the proposed subject
property’s future primary competitors.
FIGURE 7-7
BASE-YEAR AVERAGE RATE AND REVPAR OF THE COMPETITORS
Estimated 2013
Average Room
Rate
Average
Room Rate
Penetration
Rooms Revenue
Per Available
Room (RevPAR)
Hillview Motel
Coach Light Motel
North Country Inn
Siesta Motel
$75.00
75.00
105.00
80.00
85.1 %
85.1
119.2
90.8
$48.75
50.25
84.00
57.60
76.9 %
79.3
132.5
90.9
Average - Primary Competitors
Average - Secondary Competitors
$87.96
88.42
99.8 %
100.3
$63.07
63.92
99.5 %
100.9
Overall Average
$88.12
Property
RevPAR
Penetration
$63.37
The defined primarily competitive market realized an overall average rate of
$87.96 in the 2013 base year, improving from the 2012 level of $86.42. In the base
year, the North Country Inn achieved the highest ADR in the competitive market
by a wide margin because of its relatively new product, high-quality facilities, and
on-site restaurant.
July-2014
65
Market-wide rates have consistently trended upwards over the reported period.
We expect average rates to continue to improve with the anticipated increase in
demand levels and general health of the region going forward.
Market Segmentation
Method
In the market segmentation method, average room rate is projected by individual
market segment. This is the preferred method for forecasting average rate, as it is
based on the operational and marketing practices of hotel operators. Consistent
with how hotel managers track historical average rates by market segment and
their own budgeting methods, the segmentation of demand and average rate
allows for yield management resulting in the maximization of rooms revenue.
The average rates that are positioned for the proposed subject hotel in each
segment in 2013 serve as the basis for our average rate projection. Each market
segment’s average rate is projected out through the stabilized year based upon the
annual rate of change anticipated for that market segment. For each forecast year,
the segmented average rate is multiplied by the number of occupied rooms
previously projected to be captured in that segment; this results in a forecast of
total rooms revenue for each market segment. The segmented rooms revenue is
summed, resulting in a forecast of the total rooms revenue. Dividing the total
rooms revenue by the total number of occupied rooms results in the overall
weighted average room rate.
The selected rate position for the proposed subject property, in base-year dollars,
takes into consideration the location, the assumed brand presence, the quality
product and the new construction. We have positioned the proposed subject hotel
with a base-year ADR of $115.07, which is comparable to the ADR that the View
Hotel attained that year. This is considered reasonable given the comparable
product type.
The following table identifies the base-year segmented average rates and the
growth rates that are applied to each rate through the stabilized year. As a context
for the average rate growth factors, note that we have applied a base underlying
inflation rate of 2.0% per year throughout our projection.
July-2014
66
FIGURE 7-8
AVERAGE RATE FORECAST – PROPOSED SUBJECT PROPERTY
2013
Commercial
Average Rate Growth
Captured Room Nights
Rooms Revenue
Average Rate
Meeting and Group
Average Rate Growth
Rooms Revenue
Average Rate
Leisure
Average Rate Growth
Rooms Revenue
Average Rate
Extended-Stay
Average Rate Growth
Rooms Revenue
Average Rate
Total
Average Rate Growth
Rooms Revenue
Average Rate
Average Rate Penetration
Marketwide Average Rate Growth
Marketwide Average Rate
2014
2015
2016
2017
2018
2019
3.0 %
0
$0
$133.90
3.0 %
0
$0
$137.92
2.0 %
0
$0
$140.68
2.0 %
5,504
$789,830
$143.49
2.0 %
6,135
$897,917
$146.36
2.0 %
6,601
$985,377
$149.29
2.0 %
0
$0
$117.30
2.0 %
0
$0
$119.65
2.0 %
0
$0
$122.04
2.0 %
620
$77,224
$124.48
2.0 %
679
$86,238
$126.97
2.0 %
740
$95,791
$129.51
2.0 %
0
$0
$132.60
2.0 %
0
$0
$135.25
2.0 %
0
$0
$137.96
2.0 %
2,288
$322,026
$140.72
2.0 %
2,580
$370,308
$143.53
2.0 %
2,870
$420,201
$146.40
—
$105.00
3.0 %
0
$0
$108.15
3.0 %
0
$0
$111.39
2.0 %
0
$0
$113.62
2.0 %
8,928
$1,034,702
$115.89
2.0 %
9,434
$1,115,217
$118.21
2.0 %
9,948
$1,199,543
$120.58
—
4.6 %
2.8 %
2.0 %
1.6 %
17,341
$2,223,782
$128.24
2.3 %
18,828
$2,469,679
$131.17
2.1 %
20,159
$2,700,913
$133.98
—
—
$130.00
—
—
$115.00
—
—
$130.00
—
—
$115.07
130.6 %
—
$88.12
$0
$120.40
$0
$123.78
$0
$126.25
131.4 %
131.1 %
131.1 %
130.6 %
130.9 %
131.1 %
4.0 %
$91.65
3.0 %
$94.40
2.0 %
$96.29
2.0 %
$98.21
2.0 %
$100.18
2.0 %
$102.18
The stabilized average daily rate deflated to current dollars equates to $118.97.
The following occupancy and average rates are used to project the proposed
subject property's rooms revenue. This forecast reflects fiscal years that begin
January 1, 2017, which corresponds with our financial projection.
July-2014
67
FIGURE 7-9
FISCAL-YEAR FORECAST OF OCCUPANCY & AVERAGE RATE
Year
2017
2018
2019
July-2014
Occupancy
59 %
64
69
Average Rate
$128.24
131.17
133.98
68
8. Highest and Best Use
The concept of highest and best use is a fundamental element in the determination
of value of real property, either as if vacant or as improved. Highest and best use is
defined as follows:
The reasonably probable and legal use of vacant land or an improved
property that is physically possible, appropriately supported, financially
feasible, and that results in the highest value. The four criteria the highest
and best use must meet are legal permissibility, physical possibility,
financial feasibility, and maximum productivity. Alternatively, the probable
use of land or improved property—specific with respect to the user and
timing of the use—that is adequately supported and results in the highest
present value.11
The concept of highest and best use is the premise upon which value is based and
is a product of competitive forces in the marketplace. The principle of balance
holds that real property value is created and sustained when contrasting,
opposing, or interacting elements are in a state of equilibrium. This principle
applies to relationships among various property components as well as the
relationship between the costs of production and the property's productivity. The
point of economic balance is achieved when the combination of land and building
is optimal (i.e., when no marginal benefit or utility is achieved by adding another
unit of capital). The law of increasing returns holds that larger amounts of the
agents of production produce greater net income up to a certain point, after which
the law of diminishing returns is applied.
As if Vacant
Land value is derived from potential use rather than actual use. The highest and
best use is that which generates the greatest return on the land. An analysis as to
the highest and best use of the land should be made first and may be influenced by
many factors. In estimating highest and best use, there are four stages of analysis:
1.
11 The
July-2014
Legally permissible use. What uses are permitted by zoning, deed
restrictions, lease encumbrances, or any other legally binding codes,
restrictions, or interests?
Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010).
69
As detailed in the zoning section of this report, the subject site is located in
a commercially zoned district that allows for hotel, office, and retail uses,
among other uses.
2.
Physically possible use. What uses of the site are physically possible?
The subject site is large enough to support most small-scale commercial
developments, certainly a hotel, office, or strip retail development defined
under the legal uses permitted. The topography is appropriate and the
access is adequate for these types of developments.
3.
Financially feasible use. Which possible and permissible uses will produce
a net return to the owner of the site?
Given the attributes of the site, the uses that would be financially feasible
include hotel.
4.
Maximally productive use. Among the feasible uses, which use will produce
the highest net return or the highest present worth?
Given the attributes of the site and the multi-storey capability of hotel use,
the maximally productive use would be a hotel.
As if Vacant Conclusion
Considering the foregoing factors influencing development in the immediate area,
it is our opinion that the highest and best use of the subject site, as if vacant, would
be the development of a limited-service lodging facility.
Ideal Improvement
The ideal improvement for the subject site is therefore as a limited-service lodging
facility with the amenities appropriate to operate competitively in this market.
As Improved
After determining the highest and best use of the land and the ideal improvement,
an analysis should be made regarding the differences between the current
improvements and the ideal improvement.
As the subject site is currently vacant, it is our opinion that the proposed
improvements be constructed so as to allow the subject site to conform to its ideal
improvement.
July-2014
70
9. Approaches to Value
In appraising real estate for market value, three approaches to value are
considered: income capitalization, cost, and sales comparison. Basic summaries of
each approach are provided as follows; please refer to the introduction of each
respective chapter for additional description.
Income Capitalization
Approach
The income capitalization approach analyzes a property's ability to generate
financial returns as an investment. The appraisal estimates a property's operating
cash flow, and the result is utilized in a direct capitalization technique and a
discounted-cash-flow analysis. The income capitalization approach is often
selected as the preferred valuation method for operating properties because it
most closely reflects the investment rationale of knowledgeable buyers.
Sales Comparison
Approach
The sales comparison approach estimates the value of a property by comparing it
to similar properties sold on the open market. To obtain a supportable estimate of
value, the sales price of a comparable property must be adjusted to reflect any
dissimilarity between it and the property being appraised. The sales comparison
approach is most useful in the case of simple forms of real estate such as vacant
land and single-family homes, where the properties are homogeneous and the
adjustments are few and relatively simple to compute. In the case of complex
investments such as hotels, where the adjustments are numerous and more
difficult to quantify, the sales comparison approach loses much of its reliability.
Cost Approach
The cost approach estimates market value by computing the current cost of
developing the property. The value of the land is then added to the development
cost. The cost approach is most reliable for estimating the value of new and
proposed properties.
Reconciliation
The final step in the valuation process is the reconciliation and correlation of the
value indications. Factors that are considered in assessing the reliability of each
approach include the purpose of the appraisal, the nature of the proposed subject
property, and the reliability of the data used. In the reconciliation, the applicability
and supportability of each approach are considered and the range of value
indications is examined. The most significant weight is given to the approach that
produces the most reliable solution and most closely reflects the criteria used by
typical investors. Moreover, given the proposed nature of this project, the cost
approach is also highly applicable.
July-2014
Approaches to Value
71
10. Income Capitalization Approach
The income capitalization approach is based on the principle that the value of a
property is indicated by its net return, or what is known as the present worth of
future benefits. The future benefits of income-producing properties, such as hotels,
are net income before debt service and depreciation (as estimated by a forecast of
income and expense) and any anticipated reversionary proceeds from a sale.
These future benefits can be converted into an indication of market value through
a capitalization process and discounted cash flow analysis.
Methodology
Using the income capitalization approach, the proposed subject property is valued
by analyzing the local market for transient accommodations, examining future
competition, and developing a forecast of income and expense that reflects
anticipated income trends and cost components through a stabilized year of
operation.
The forecast of income and expense is expressed in current dollars for each year.
The stabilized year is intended to reflect the anticipated operating results of the
property over the hotel’s remaining economic life, given any or every applicable
stage of build-up, plateau, and decline in the lifecycle of the hotel. Thus, income
and expense estimates from the stabilized year forward exclude from
consideration any abnormal relationship between supply and demand, as well as
any nonrecurring conditions that may result in unusual revenues or expenses. The
stabilized year's net income is then extended into an 11-year forecast of income
and expense by applying the assumed underlying inflation rate to each revenue
and expense item from the stabilized year forward, unless otherwise noted.
The 11-year forecast of net income forms the basis of a mortgage-equity and
discounted cash flow analysis, in which ten years of net income and a reversion
derived from the capitalized eleventh year's net income are discounted back to the
date of value and summed to derive an estimate of market value. The 10-year
period reflects the typical holding period of large real estate assets like hotels. In
addition, the 10-year time frame provides for the stabilization of income streams
and the comparison of yields with alternative types of real estate. The forecasted
income streams reflect the future benefits of owning specific rights in incomeproducing real estate.
July-2014
72
Because the value is unknown but the loan-to-value ratio and the market rates of
return can be estimated, the value is computed by way of a linear algebraic
equation. The algebraic equation that solves for the total property value using a
10-year mortgage-equity technique was developed by Suzanne R. Mellen, CRE,
MAI, FRICS, ISHC, Managing Director of the San Francisco office of HVS. A complete
discussion of the technique is presented in her article, “Simultaneous Valuation: A
New Technique.”12
Comparable Operating
Statements
In order to project future income and expense for the proposed subject property,
we have included a sample of individual comparable operating statements from
our database of hotel statistics. The financial data are presented according to the
three most common measures of industry performance: ratio to sales (RTS),
amounts per available room (PAR), and amounts per occupied room night (POR).
These historical income and expense statements are used as benchmarks in our
forthcoming forecast of income and expense.
12
Suzanne Mellen, "Simultaneous Valuation: A New Technique," Appraisal Journal
(April 1983).
July-2014
73
FIGURE 10-1 COMPARABLE OPERATING STATEMENTS: RATIO TO SALES
Year:
Number of Rooms:
Occupied Rooms:
Complimentary Rooms:
Days Open:
Occupancy:
Average Rate:
RevPAR:
REVENUE
Rooms
Food & Beverage
Other Operated Departments
Rentals & Other Income
Total
DEPARTMENTAL EXPENSES*
Rooms
Food & Beverage
Total
DEPARTMENTAL INCOME
OPERATING EXPENSES
Administrative & General
Marketing
Franchise Fee
Property Operations & Maintenance
Utilities
Total
HOUSE PROFIT
Management Fee
INCOME BEFORE FIXED CHARGES
FIXED EXPENSES
Property Taxes
Insurance
Reserve for Replacement
Total
NET INCOME
Comp 1
Comp 2
Comp 3
Comp 4
Comp 5
2012/13
40 to 50
11,650
0
365
71%
$90
$64
2012/13
50 to 70
8,487
0
365
41%
$103
$42
2013
70 to 90
22,205
0
365
77%
$144
$111
2011/12
70 to 100
23,585
0
365
76%
$127
$96
2010/11
110 to 140
30,950
0
365
67%
$121
$81
100.0 %
0.0
0.0
0.0
100.0
99.8 %
0.0
0.0
0.2
100.0
99.7 %
0.0
0.0
0.3
100.0
99.2 %
0.0
0.8
0.0
100.0
Subject
Stabilized $
2013
80
20,148
0
365
69%
$119
$82
69.1 %
17.9
9.9
3.1
100.0
98.8 %
0.0
0.0
1.2
100.0
26.5
0.0
0.0
0.0
26.5
73.5
32.6
0.0
0.0
0.0
32.5
67.5
22.2
0.0
0.0
0.0
22.2
77.8
27.0
0.0
50.5
0.0
27.2
72.8
19.9
88.8
0.0
0.0
29.7
70.3
24.0
0.0
0.0
0.0
23.7
76.3
7.1
0.5
0.0
2.5
4.1
14.2
59.3
4.0
55.3
12.0
1.9
0.0
3.6
5.9
23.5
44.0
3.5
40.5
10.9
1.4
7.9
3.1
4.8
28.2
49.6
4.9
44.8
4.8
0.9
8.4
0.5
2.9
17.5
55.3
3.0
52.3
8.2
1.3
0.0
4.0
4.6
18.1
52.2
3.0
49.3
8.6
2.3
0.0
4.6
4.3
19.8
56.5
5.0
51.5
10.2
1.6
4.0
15.8
39.5 %
5.4
2.3
4.0
11.7
28.8 %
6.1
0.5
4.0
10.6
34.2 %
5.4
0.6
4.0
10.0
42.3 %
3.9
1.1
4.0
9.0
40.3 %
4.0
1.0
4.0
9.0
42.6 %
* Departmental expense ratios are expressed as a percentage of departmental revenues
July-2014
74
FIGURE 10-2 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER AVAILABLE ROOM
Year:
Number of Rooms:
Occupied Rooms:
Days Open:
Occupancy:
Average Rate:
RevPAR:
REVENUE
Rooms
Food & Beverage
Total
DEPARTMENTAL EXPENSES
Rooms
Food & Beverage
Total
DEPARTMENTAL INCOME
OPERATING EXPENSES
Marketing
Franchise Fee
Utilities
Total
HOUSE PROFIT
Management Fee
FIXED EXPENSES
Property Taxes
Insurance
Total
NET INCOME
July-2014
Comp 1
Comp 2
Comp 3
Comp 4
Comp 5
2012/13
40 to 50
11,650
0
365
71%
$90
$64
2012/13
50 to 70
8,487
0
365
41%
$103
$42
2013
70 to 90
22,205
0
365
77%
$144
$111
2011/12
70 to 100
23,585
0
365
76%
$127
$96
2010/11
110 to 140
30,950
0
365
67%
$121
$81
Subject
Stabilized $
2013
80
20,148
0
365
69%
$119
$82
$23,295
0
0
11
23,306
$15,404
0
0
33
15,437
$40,515
0
0
105
40,620
$35,222
0
287
0
35,509
$29,441
7,622
4,205
1,339
42,606
$29,963
0
0
378
30,341
6,168
0
0
0
6,168
17,138
5,017
0
0
0
5,017
10,421
9,005
0
0
0
9,005
31,615
9,516
0
145
0
9,661
25,849
5,866
6,772
0
0
12,638
29,969
7,191
0
0
0
7,191
23,150
1,660
111
0
589
958
3,318
13,820
932
12,888
1,857
288
0
561
917
3,623
6,798
540
6,257
4,423
587
3,194
1,266
1,967
11,437
20,178
1,996
18,182
1,690
334
2,994
170
1,023
6,211
19,638
1,065
18,573
3,496
543
0
1,693
1,969
7,701
22,268
1,276
20,992
2,600
700
0
1,400
1,300
6,000
17,150
1,517
15,633
2,381
369
932
3,683
$9,205
830
358
617
1,805
$4,452
2,478
186
1,625
4,289
$13,893
1,910
216
1,420
3,546
$15,027
1,661
465
1,701
3,827
$17,165
1,202
300
1,213
2,716
$12,917
75
FIGURE 10-3 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER OCCUPIED ROOM
Year:
Number of Rooms:
Occupied Rooms:
Days Open:
Occupancy:
Average Rate:
RevPAR:
REVENUE
Rooms
Food & Beverage
Total
DEPARTMENTAL EXPENSES
Rooms
Food & Beverage
Total
DEPARTMENTAL INCOME
OPERATING EXPENSES
Marketing
Franchise Fee
Utilities
Total
HOUSE PROFIT
Management Fee
FIXED EXPENSES
Property Taxes
Insurance
Total
NET INCOME
July-2014
Comp 1
Comp 2
Comp 3
Comp 4
Comp 5
2012/13
40 to 50
11,650
0
365
71%
$90
$64
2012/13
50 to 70
8,487
0
365
41%
$103
$42
2013
70 to 90
22,205
0
365
77%
$144
$111
2011/12
70 to 100
23,585
0
365
76%
$127
$96
2010/11
110 to 140
30,950
0
365
67%
$121
$81
Subject
Stabilized $
2013
80
20,148
0
365
69%
$119
$82
$89.98
0.00
0.00
0.04
90.02
$103.46
0.00
0.00
0.22
103.68
$144.14
0.00
0.00
0.37
144.52
$126.94
0.00
1.03
0.00
127.97
$120.81
31.28
17.25
5.49
174.83
$118.97
0.00
0.00
1.50
120.47
23.82
0.00
0.00
0.00
23.82
66.20
33.69
0.00
0.00
0.00
33.69
69.99
32.04
0.00
0.00
0.00
32.04
112.48
34.29
0.00
0.52
0.00
34.82
93.16
24.07
27.79
0.00
0.00
51.86
122.97
28.55
0.00
0.00
0.00
28.55
91.92
6.41
0.43
0.00
2.28
3.70
12.82
53.38
3.60
49.78
12.47
1.94
0.00
3.77
6.16
24.34
45.65
3.63
42.02
15.74
2.09
11.36
4.50
7.00
40.69
71.79
7.10
64.69
6.09
1.21
10.79
0.61
3.69
22.38
70.78
3.84
66.94
14.35
2.23
0.00
6.95
8.08
31.60
91.37
5.23
86.14
10.32
2.78
0.00
5.56
5.16
23.82
68.10
6.02
62.07
9.20
1.43
3.60
14.22
$35.56
5.57
2.40
4.15
12.12
$29.90
8.82
0.66
5.78
15.26
$49.43
6.88
0.78
5.12
12.78
$54.16
6.82
1.91
6.98
15.70
$70.44
4.77
1.19
4.82
10.78
$51.29
76
For the comparable hotels, the departmental income ranges from 67.5% to 77.8%
of total revenue, and the house profit ranges from 44.0% to 59.3% of total
revenue. We refer to the comparable operating data in our discussion of each line
item, which follows later in this section of the report.
Fixed and Variable
Component Analysis
HVS uses a fixed and variable component model to project a lodging facility's
revenue and expense levels. This model is based on the premise that hotel
revenues and expenses have one component that is fixed and another that varies
directly with occupancy and facility usage. A projection can be made by taking a
known level of revenue or expense and calculating its fixed and variable
components. The fixed component is then increased in tandem with the underlying
rate of inflation, while the variable component is adjusted for a specific measure of
volume, such as total revenue.
The actual forecast is derived by adjusting each year’s revenue and expense by the
amount fixed (the fixed expense multiplied by the inflated base-year amount) plus
the variable amount (the variable expense multiplied by the inflated base-year
amount) multiplied by the ratio of the projection year’s occupancy to the base-year
occupancy (in the case of departmental revenue and expense) or the ratio of the
projection year’s revenue to the base year’s revenue (in the case of undistributed
operating expenses). Fixed expenses remain fixed, increasing only with inflation.
Our discussion of the revenue and expense forecast in this report is based upon
the output derived from the fixed and variable model. This forecast of revenue and
expense is accomplished through a systematic approach, following the format of
the Uniform System of Accounts for the Lodging Industry. Each category of revenue
and expense is estimated separately and combined at the end in the final
statement of income and expense.
Inflation Assumption
July-2014
A general rate of inflation must be established that will be applied to most revenue
and expense categories. The following table shows the historical consumer price
index (CPI) for province of British Columbia and Canada.
77
FIGURE 10-4 CONSUMER PRICE INDEX – BRITISH COLUMBIA AND CANADA
Provincial Consumer
Price Index
Year
Percent Change
National Consumer
From Previous Year
Price Index
Percent Change
From Previous Year
2005
2006
2007
2008
2009
2010
2011
2012
2013
106.3
108.1
110.0
112.3
112.3
113.8
116.5
117.8
117.7
—
1.7 %
1.8
2.1
0.0
1.3
2.4
1.1
-0.1
107.0
109.1
111.5
114.1
114.4
116.5
119.9
121.7
122.8
—
2.0 %
2.2
2.3
0.3
1.8
2.9
1.5
0.9
YTD April 2013
YTD April 2014
117.2
119.0
—
1.5 %
122.7
125.2
—
2.0 %
Avg. Annual Comp. Change,
2005 - 2013
1.3 %
1.7 %
Source: Statistics Canada
As a further check, we reviewed the national inflation forecasts of several
Canadian banks.
FIGURE 10-5 NATIONAL INFLATION FORECASTS
2014f
Scotiabank Group
BMO Capital Markets
RBC
TD Canada Trust
CIBC
1.9 %
1.6
1.5
1.5
1.5
2015f
2.0 %
1.8
1.9
1.9
1.9
Updated: April 2014
Considering these historical trends, the projections set forth above, and our
assessment of probable property appreciation levels, an underlying inflation rate
of 2.0% per year is applied to all appropriate revenue and expense items
throughout the projection period. This stabilized inflation rate takes into account
normal, recurring inflation cycles. Inflation is likely to fluctuate above and below
this level during the projection period. Any exceptions to the application of the
assumed underlying inflation rate are noted in the discussion of the individual
income and expense items that follows.
July-2014
78
Summary of
Projections
July-2014
Based on analyses that will be detailed throughout this section, we have
formulated a forecast of income and expense. The following table presents a
detailed forecast through the third projection year that includes amounts per
available room and per occupied room. The second table illustrates the full 10year forecast of income and expense, presented with less detail. The forecast
pertains to calendar years beginning January 1, 2017, and it is expressed in
inflated dollars for each year.
79
FIGURE 10-6 DETAILED FORECAST OF INCOME AND EXPENSE
2017 (Calendar Year)
Number of Rooms:
Occupancy:
Average Rate:
RevPAR:
Days Open:
Occupied Rooms:
2018
Stabilized
80
80
80
59%
64%
69%
$128.24
$131.17
$133.98
$75.66
$83.95
$92.45
365
365
17,228 %Gross
PAR
POR
365
18,688 %Gross
PAR
POR
20,148 %Gross
PAR
POR
REVENUE
Rooms
Total Revenues
$2,209
$128.22
$2,451
1.4
391
1.82
33
2,240 100.0
28,004
130.04
31
98.6 % $27,613
98.7 % $30,638
$131.15
$2,699
1.3
408
1.75
34
2,484 100.0
31,046
132.90
98.8 % $33,738
$133.96
1.2
425
1.69
2,733 100.0
34,163
135.65
32.16
DEPARTMENTAL EXPENSES *
Rooms
587
26.6
7,333
34.05
617
25.2
7,709
33.00
648
24.0
8,098
Total
587
26.2
7,333
34.05
617
24.8
7,709
33.00
648
23.7
8,098
32.16
1,654
73.8
20,671
95.99
1,867
75.2
23,336
99.90
2,085
76.3
26,065
103.49
217
9.7
2,711
12.59
225
9.1
2,818
12.06
234
8.6
2,928
11.63
58
2.6
730
3.39
61
2.4
759
3.25
63
2.3
788
3.13
Prop. Operations & Maint.
117
5.2
1,460
6.78
121
4.9
1,517
6.50
126
4.6
1,577
6.26
Utilities
108
4.8
1,355
6.29
113
4.5
1,409
6.03
117
4.3
1,464
5.81
Total
500
22.3
6,255
29.05
520
20.9
6,503
27.84
541
19.8
6,757
26.83
1,153
51.5
14,416
66.94
1,347
54.3
16,833
72.06
1,545
56.5
19,308
76.66
112
5.0
1,400
6.50
124
5.0
1,552
6.65
137
5.0
1,708
6.78
1,041
46.5
13,015
60.44
1,222
49.3
15,281
65.41
1,408
51.5
17,600
69.88
DEPARTMENTAL INCOME
UNDISTRIBUTED OPERATING EXPENSES
Marketing
HOUSE PROFIT
Management Fee
FIXED EXPENSES
Property Taxes
104
4.6
1,302
6.04
106
4.3
1,328
5.68
108
4.0
1,354
5.38
Insurance
26
1.2
325
1.51
26
1.1
331
1.42
27
1.0
338
1.34
45
2.0
560
2.60
75
3.0
931
3.99
109
4.0
1,367
5.43
175
7.8
2,186
10.15
207
8.4
2,590
11.09
245
9.0
3,058
12.14
38.7 % $10,829
$50.29
$1,015
40.9 % $12,690
$54.33
$1,163
42.5 % $14,541
$57.74
Total
NET INCOME
$866
*Departmental expenses are expressed as a percentage of departmental revenues.
July-2014
80
FIGURE 10-7 TEN-YEAR FORECAST OF INCOME AND EXPENSE
2017
Number of Rooms:
Occupied Rooms:
Occupancy:
Average Rate:
RevPAR:
2018
2019
2020
2021
2022
2023
2024
2025
2026
80
80
80
80
80
80
80
80
80
80
17,228
18,688
20,148
20,148
20,148
20,148
20,148
20,148
20,148
20,148
59%
64%
69%
69%
69%
69%
69%
69%
69%
69%
$128.24 % of
$131.17
% of
$133.98
% of
$136.66
% of
$139.39
% of
$142.18
% of
$145.03
% of
$147.93
% of
$150.89
% of
$153.90
% of
$75.66 Gross
$83.95
Gross
$92.45
Gross
$94.30
Gross
$96.18
Gross
$98.11
Gross
$100.07
Gross
$102.07
Gross
$104.11
Gross
$106.19
Gross
$2,209
$2,451
98.7 %
$2,699
98.8 %
$2,753
98.8 %
$2,809
98.8 %
$2,865
98.8 %
$2,922
98.8 %
$2,980
98.8 %
$3,040
98.8 %
$3,101
98.8 %
REVENUE
Rooms
Total
31
98.6 %
1.4
2,240 100.0
33
1.3
2,484 100.0
34
1.2
2,733 100.0
35
1.2
2,788 100.0
35
1.2
2,844 100.0
36
1.2
2,901 100.0
37
1.2
2,959 100.0
38
1.2
3,018 100.0
38
1.2
3,078 100.0
39
1.2
3,140 100.0
DEPARTMENTAL EXPENSES*
Rooms
587
26.6
617
25.2
648
24.0
661
24.0
674
24.0
688
24.0
701
24.0
715
24.0
730
24.0
744
24.0
Total
587
26.2
617
24.8
648
23.7
661
23.7
674
23.7
688
23.7
701
23.7
715
23.7
730
23.7
744
23.7
1,654
73.8
1,867
75.2
2,085
76.3
2,127
76.3
2,170
76.3
2,214
76.3
2,258
76.3
2,302
76.3
2,349
76.3
2,396
76.3
217
9.7
225
9.1
234
8.6
239
8.6
244
8.6
249
8.6
254
8.6
259
8.6
264
8.6
269
8.6
58
2.6
61
2.4
63
2.3
64
2.3
66
2.3
67
2.3
68
2.3
70
2.3
71
2.3
72
2.3
Prop. Operations & Maint.
117
5.2
121
4.9
126
4.6
129
4.6
131
4.6
134
4.6
137
4.6
139
4.6
142
4.6
145
4.6
Utilities
108
4.8
113
4.5
117
4.3
119
4.3
122
4.3
124
4.3
127
4.3
129
4.3
132
4.3
135
4.3
Total
500
22.3
520
20.9
541
19.8
551
19.8
562
19.8
574
19.8
585
19.8
597
19.8
609
19.8
621
19.8
1,153
51.5
1,347
54.3
1,545
56.5
1,576
56.5
1,608
56.5
1,640
56.5
1,672
56.5
1,705
56.5
1,740
56.5
1,775
56.5
112
5.0
124
5.0
137
5.0
139
5.0
142
5.0
145
5.0
148
5.0
151
5.0
154
5.0
157
5.0
1,041
46.5
1,222
49.3
1,408
51.5
1,436
51.5
1,466
51.5
1,495
51.5
1,525
51.5
1,555
51.5
1,586
51.5
1,618
51.5
DEPARTMENTAL INCOME
UNDISTRIBUTED OPERATING EXPENSES
Marketing
HOUSE PROFIT
Management Fee
FIXED EXPENSES
Property Taxes
104
4.6
106
4.3
108
4.0
110
4.0
113
4.0
115
4.0
117
4.0
120
4.0
122
4.0
124
4.0
Insurance
26
1.2
26
1.1
27
1.0
28
1.0
28
1.0
29
1.0
29
1.0
30
1.0
30
1.0
31
1.0
45
2.0
75
3.0
109
4.0
112
4.0
114
4.0
116
4.0
118
4.0
121
4.0
123
4.0
126
4.0
175
7.8
207
8.4
245
9.0
250
9.0
255
9.0
260
9.0
265
9.0
270
9.0
276
9.0
281
Total
NET INCOME
$866 38.7 %
$1,015 40.9 %
1
1
*Departmental expenses are expressed as a percentage of departmental revenues.
July-2014
$1,163
1
42.5 %
$1,187
1
42.5 %
$1,211
1
42.5 %
$1,235
1
42.5 %
$1,260
1
42.5 %
$1,284
1
42.5 %
$1,310
1
42.5 %
$1,337
1
9.0
42.5 %
81
Forecast of Income and
Expense
The following description sets forth the basis for the forecast of income and
expense. We anticipate that it will take three years for the proposed subject
property to reach a stabilized level of operation. Each revenue and expense item
has been forecast based upon our review of the comparable income and expense
statements. Our forecast is based upon calendar years beginning January 1, 2017,
and it is expressed in inflated dollars for each year.
Rooms Revenue
Rooms revenue is determined by two variables: occupancy and average rate. We
projected occupancy and average rate in a previous section of this report. The
proposed subject property is projected to stabilize with an occupancy level of 69%
and an average rate of $133.98 in 2019. Following the stabilized year, the
proposed subject property’s average rate is projected to increase along with the
underlying rate of inflation.
Rentals & Other
Income
The proposed subject property will generate other income primarily from meeting
space rentals, in-room movie charges, guest laundry, business centre charges, and
the vending areas. We reviewed operations with similar offerings to position the
appropriate revenue level for the proposed subject property. The proposed subject
property’s rentals and other income is forecast at $1.82 per occupied room in Year
One, and it is projected to stabilize at $1.69 per occupied room in 2019.
Rooms Expense
Rooms expense consists of items related to the sale and upkeep of guestrooms and
public space. Salaries, wages, and employee benefits account for a substantial
portion of this category. Although payroll varies somewhat with occupancy and
managers can generally scale the level of service staff on hand to meet an expected
occupancy level, much of a hotel's payroll is fixed. A base level of front desk
personnel, housekeepers, and supervisors must be maintained at all times. As a
result, salaries, wages, and employee benefits are only moderately sensitive to
changes in occupancy.
Commissions and reservations are usually based on room sales, and thus are
highly sensitive to changes in occupancy and average rate. While guest supplies
vary 100% with occupancy, linens and other operating expenses are only slightly
affected by volume.
The proposed subject hotel's rooms department expense has been positioned
based upon our review of the comparable operating data and our understanding of
the hotel's future service level and price point. For the comparable hotels, the
rooms expense ranges between 19.9% and 32.6% of rooms revenue, or between
$23.82 and $34.29 per occupied room. The proposed subject property’s rooms
expense is forecast at 26.6% of rooms revenue (or $34.05 per occupied room) in
Year One, and it is projected to stabilize at 24.0% of rooms revenue (or $32.16 per
occupied room) in 2019.
July-2014
82
Administrative and
General Expense
Administrative and general expense includes the salaries and wages of all
administrative personnel who are not directly associated with a particular
department. Expense items related to the management and operation of the
property are also allocated to this category.
Most administrative and general expenses are relatively fixed. The exceptions are
cash overages and shortages; commissions on credit card charges; provision for
doubtful accounts, which are moderately affected by the number of transactions or
total revenue; and salaries, wages, and benefits, which are very slightly influenced
by volume.
Based upon our review of the comparable operating data and the expected scope
of facility for the proposed subject hotel, we have positioned the administrative
and general expense level at a market- and property-supported level. For the
comparable operations, the administrative and general expense ranges from 4.8%
to 12.0% of total revenue, or from $1,660 to $4,423 per available room. In the first
projection year, the proposed subject hotel’s administrative and general expense is
forecast at $2,711 per available room, or 9.7% of total revenue. By the 2019
stabilized year, these amounts change to $2,928 per available room and 8.6% of
total revenue.
Marketing Expense
Marketing expense consists of all costs associated with advertising, sales, and
promotion; these activities are intended to attract and retain customers. Marketing
can be used to create an image, develop customer awareness, and stimulate
patronage of a property's various facilities.
The marketing category is unique in that all expense items, with the exception of
fees and commissions, are totally controlled by management. Most hotel operators
establish an annual marketing budget that sets forth all planned expenditures. If
the budget is followed, total marketing expenses can be projected accurately.
Marketing expenditures are unusual because although there is a lag period before
results are realized, the benefits are often extended over a long period. Depending
on the type and scope of the advertising and promotion program implemented, the
lag time can be as short as a few weeks or as long as several years. However, the
favorable results of an effective marketing campaign tend to linger, and a property
often enjoys the benefits of concentrated sales efforts for many months.
Based upon our review of the comparable operating data and the expected scope
of facility for the proposed subject hotel, we have positioned the marketing
expense level at a market- and property-supported level. For the comparable
operations, the marketing expense ranges from 0.5% to 1.9% of total revenue, or
from $111 to $587 per available room. Because this is a new high-quality property,
July-2014
83
we have assumed a slightly higher marketing expense than the comparables, thus
in the first projection year, the proposed subject property’s marketing expense is
forecast at $730 per available room, or 2.6% of total revenue. By the 2019
stabilized year, these amounts change to $788 per available room and 2.3% of
total revenue.
Franchise Fee
As previously discussed, the subject is expected to be brand operated; as such, no
franchise agreement will exist and no franchise fees are expected to be required
throughout the ten-year forecast period.
Property Operations
and Maintenance
Property operations and maintenance expense is another expense category that is
largely controlled by management. Except for repairs that are necessary to keep
the facility open and prevent damage (e.g., plumbing, heating, and electrical items),
most maintenance can be deferred for varying lengths of time.
Maintenance is an accumulating expense. If management elects to postpone
performing a required repair, they have not eliminated or saved the expenditure;
they have only deferred payment until a later date. A lodging facility that operates
with a lower-than-normal maintenance budget is likely to accumulate a
considerable amount of deferred maintenance.
The age of a lodging facility has a strong influence on the required level of
maintenance. A new or thoroughly renovated property is protected for several
years by modern equipment and manufacturers' warranties. However, as a
hostelry grows older, maintenance expenses escalate. A well-organized preventive
maintenance system often helps delay deterioration, but most facilities face higher
property operations and maintenance costs each year, regardless of the occupancy
trend. The quality of initial construction can also have a direct impact on future
maintenance requirements. The use of high-quality building materials and
construction methods generally reduces the need for maintenance expenditures
over the long term.
We expect the proposed subject hotel's maintenance operation to be well
managed, and expense levels should stabilize at a typical level for a property of
this type. For the comparable operations, the property operations and
maintenance expense ranges from 0.5% to 4.0% of total revenue, or from $170 to
$1,693 per available room. Changes in this expense item through the projection
period result from the application of the underlying inflation rate and projected
changes in occupancy. In the first projection year, the proposed subject hotel’s
property operations and maintenance expense is forecast at $1,460 per available
room, or 5.2% of total revenue. By the 2019 stabilized year, these amounts change
to $1,577 per available room and 4.6% of total revenue.
July-2014
84
Utilities Expense
The utilities consumption of a lodging facility takes several forms, including water
and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous
power requirements. The most common sources of hotel utilities are electricity,
natural gas, fuel oil, and steam. This category also includes the cost of water
service.
Total energy cost depends on the source and quantity of fuel used. Electricity tends
to be the most expensive source, followed by oil and gas. Although all hotels
consume a sizable amount of electricity, many properties supplement their utility
requirements with less expensive sources, such as gas and oil, for heating and
cooking.
For the comparable operations, the utilities expense ranges from 2.9% to 5.9% of
total revenue, or from $917 to $1,969 per available room. The changes in the
utilities line item through the projection period are a result of the application of
the underlying inflation rate and projected changes in occupancy. In the first
projection year, the proposed subject hotel’s utilities expense is forecast at $1,355
per available room, or 4.8% of total revenue. By the 2019 stabilized year, these
amounts change to $1,464 per available room and 4.3% of total revenue.
Management Fee
Management expense consists of the fees paid to the managing agent contracted to
operate the property. Some companies provide management services and a brandname affiliation (first-tier management company), while others provide
management services alone (second-tier management company). Some
management contracts specify only a base fee (usually a percentage of total
revenue), while others call for both a base fee and an incentive fee (usually a
percentage of defined profit). Basic hotel management fees are almost always
based on a percentage of total revenue, which means they have no fixed
component. While base fees typically range from 2% to 4% of total revenue,
incentive fees are deal specific and often are calculated as a percentage of income
available after debt service and, in some cases, after a preferred return on equity.
The proposed subject property’s total management fee is forecast at 5.0% of total
revenue. The projected management fee reflects the assumption that the
management company will both manage and brand the proposed subject hotel.
Property Taxes
July-2014
Property (or ad valorem) tax is one of the primary revenue sources of
municipalities. Based on the concept that the tax burden should be distributed in
proportion to the value of all properties within a taxing jurisdiction, a system of
assessments is established. Theoretically, the assessed value placed on each parcel
bears a definite relationship to market value, so properties with equal market
values will have similar assessments and properties with higher and lower values
will have proportionately larger and smaller assessments.
85
Depending on the taxing policy of the municipality, property taxes can be based on
the value of the real property or the value of the personal property and the real
property. We have based our estimate of the proposed subject property's market
value (for tax purposes) on an analysis of assessments of comparable hotel
properties in the local municipality.
FIGURE 10-8 ASSESSED VALUE OF COMPARABLE HOTELS
Number
of Rooms
Hotel
North Country Inn
Coach Light Motel
Hillview Motel
Siesta Motel
37
12
38
14
Assessments per Room
North Country Inn
Coach Light Motel
Hillview Motel
Siesta Motel
Positioned Subject - Per Room
Positioned Subject - Total
80
Total Assessment
Land
Improvements
Total
$90,000
200,900
320,000
104,300
$294,600
269,000
760,000
326,700
$384,600
469,900
1,080,000
431,000
$2,432
16,742
8,421
7,450
$7,962
22,417
20,000
23,336
$10,395
39,158
28,421
30,786
$15,000
$35,000
$50,000
$1,200,000
$2,800,000
$4,000,000
Source: BC Assessment
We have positioned the future assessment levels of the subject site and proposed
improvements, based upon the illustrated comparable data. We have positioned
these assessments as the highest in the market, taking into consideration the new
construction and quality facilities.; overall, the positioned assessments are well
supported by the market data.
The tax rate is based on the District’s budget, which changes annually. The
following table shows changes in the mill rate over the past several years.
July-2014
86
FIGURE 10-9 MILL RATES
Year
Real Property
Tax Rate
2011
2012
2013
25.59770
24.63490
24.04790
Source: District of Vanderhoof
Based on comparable assessments and the tax rate information, the proposed
subject property's projected property tax expense levels are calculated as follows.
FIGURE 10-10 PROJECTED PROPERTY TAX EXPENSE
Insurance Expense
Assessed Value
Improvements
Total
Property
Tax Rate
Tax
Forecast
Year
Land
Positioned
$1,200,000
$2,800,000
$4,000,000
24.05
$96,192
2017
2018
2019
$1,200,000
1,200,000
1,200,000
$2,800,000
2,800,000
2,800,000
$4,000,000
4,000,000
4,000,000
26.03
26.55
27.08
$104,121
$106,203
$108,327
The insurance expense category consists of the cost of insuring the hotel and its
contents against damage or destruction by fire, weather, sprinkler leakage, boiler
explosion, plate glass breakage, and so forth. General insurance costs also include
premiums relating to liability, fidelity, and theft coverage. Insurance rates are
based on many factors, including building design and construction, fire detection
and extinguishing equipment, fire district, distance from the firehouse, and the
area's fire experience. Insurance expenses do not vary with occupancy.
Based upon the comparable data and the structural attributes of the proposed
subject hotel, we project the proposed subject property's insurance expense at
$338 per available room by the stabilized year (positioned at $300 per available
room in base-year dollars). This forecast equates to 1.0% of total revenue on a
stabilized basis. In subsequent years, this amount is assumed to increase in
tandem with inflation.
Reserve for
Replacement
July-2014
Furniture, fixtures, and equipment are essential to the operation of a lodging
facility, and their quality often influences a property's class. This category includes
all non-real estate items that are capitalized, rather than expensed. The furniture,
87
fixtures, and equipment of a hotel are exposed to heavy use and must be replaced
at regular intervals. The useful life of these items is determined by their quality,
durability, and the amount of guest traffic and use.
Periodic replacement of furniture, fixtures, and equipment is essential to maintain
the quality, image, and income-producing potential of a lodging facility. Because
capitalized expenditures are not included in the operating statement but affect an
owner's cash flow, a forecast of income and expense should reflect these expenses
in the form of an appropriate reserve for replacement.
The International Society of Hospitality Consultants (ISHC) undertook a major
industry-sponsored study of the capital expenditure requirements for fullservice/luxury, select-service, and extended-stay hotels. The most recent findings
of the study were published in a report in 2007.13 Historical capital expenditures
of well-maintained hotels were investigated through the compilation of data
provided by most of the major hotel companies in the United States. A prospective
analysis of future capital expenditure requirements was also performed based
upon the cost to replace short- and long-lived building components over a hotel's
economic life. The study showed that the capital expenditure requirements for
hotels vary significantly from year to year and depend upon both the actual and
effective ages of a property. The results of this study showed that hotel lenders and
investors are requiring reserves for replacement ranging from 4% to 5% of total
revenue.
Based upon the results of this study, our review of comparable lodging facilities,
and our industry expertise, we estimate that a reserve for replacement of 4.0% of
total revenue is sufficient to provide for the timely and periodic replacement of the
proposed subject property's furniture, fixtures, and equipment. This amount is
ramped up during the initial years of the projection period.
INCOME
CAPITALIZATION
The proposed subject property is valued via the income approach through the
application of a 10-year mortgage-equity technique and a discounted-cash-flow
analysis. The conversion of the subject property's forecasted net income into an
estimate of value was based on the premise that investors typically purchase real
estate with a modest to significant amount of equity cash (20% to 50%) and a
moderate amount of mortgage financing (50% to 80%). The amounts and terms of
available mortgage financing and the rates of return that are required to attract
sufficient equity capital form the basis for allocating the net income between the
mortgage and equity components and deriving a value estimate.
The International Society of Hotel Consultants, CapEx 2007, A Study of Capital
Expenditure in the U.S. Hotel Industry.
13
July-2014
88
To determine what the terms of a hotel loan would be as of the date of value, we
interviewed brokers as well as lending officers. At present, lenders who are active
in the Canadian market are using loan-to-value ratios of 50% to 70% and
amortization periods of 15 to 25 years. The exact terms offered depend on specific
factors such as the property's location, the age and quality of the physical facility,
local hostelry market conditions, and (perhaps more significantly) the profile of
the borrower. The strongest projects typically command the highest loan-to-value
ratios. Interest rates currently range from 4.5% to 6.5%, compounded semiannually.
Based on the proposed subject property's quality, location, market setting, and
borrower profile, the appropriate loan-to-value ratio for this valuation is 60%. A
direct correlation exists between the interest rate and the loan-to-value ratio; at a
lower interest rate, a lower loan-to-value ratio is applied.
Based on the preceding analysis of the current lodging industry mortgage market
and considering specific factors such as the property's location and local market
conditions, it is our opinion that a mortgage with a 5.00% interest rate, a 20-year
amortization period, and a 0.078855 mortgage constant is appropriate for the
proposed subject property. A mortgage constant is the capitalization rate for debt,
the ratio of the annual debt service to the principal amount of the mortgage loan.
In simple terms, the mortgage constant is the percentage by which one multiplies
the loan to determine the payment.
Equity Component &
Equity Yield Rate
The remaining capital required for a hotel investment generally comes from the
equity investor. The rate of return that an equity investor expects over a 10-year
holding period is known as the equity yield. Unlike the equity dividend, which is a
short-term rate of return, the equity yield specifically considers a long-term
holding period (generally ten years), annual inflation-adjusted cash flows,
property appreciation, mortgage amortization, and proceeds from a sale at the end
of the holding period. To establish an appropriate equity yield rate, we have used
two sources of data: past appraisals and investor interviews.
Hotel Sales – Each appraisal performed by HVS uses a mortgage-equity approach
in which income is projected and then discounted to a current value at rates
reflecting the cost of debt and equity capital. In the case of hotels that were sold
near the date of our valuation, we were able to derive the equity yield rate and
unlevered discount rate by inserting the ten-year projection, total investment
(purchase price and estimated capital expenditure and/or PIP) and debt
assumptions into a valuation model and solving for the equity yield. The overall
capitalization rates for the historical income and projected first-year income are
based on the sales price “as is.” The following table shows a representative sample
July-2014
89
of hotels that were sold on or about the time that we appraised them, along with
the derived equity return and discount rates based on the purchase price and our
forecast.
FIGURE 10-11 SAMPLE OF HOTELS SOLD
Overall Rate Based on
Net Operating Income
Location
Limited-Service
Ottawa, ON
Chilliwack, BC
Edmonton, AB
Grande Prairie, AB
Fort St. John, BC
Regina, SK
Mississauga, ON
Mississauga, ON
Vaughan, ON
Hamilton, ON
Montreal, QC
Montreal, QC
Richmond, BC
Squamish, BC
London, ON
Winnipeg, MB
Canmore, AB
Niagara Falls, ON
Ottawa, ON
Fort McMurray, AB
Slave Lake, AB
Calgary, AB
Brooks, AB
Number
of Rooms
Date
of Sale
115
83
160
126
127
118
94
133
132
136
160
169
129
95
124
66
99
194
81
83
68
120
78
Oct-13
Sep-13
Jun-12
Feb-12
Feb-12
Dec-11
Oct-11
Oct-11
Oct-11
Oct-11
Jun-11
Jun-11
Jun-11
May-11
Mar-11
Jul-10
Mar-10
Oct-09
Aug-08
Feb-08
Nov-07
Jun-07
May-07
Total
Property
Yield
10.8 %
13.6
11.7
22.2
22.7
12.0
11.7
11.7
13.2
10.3
13.7
14.0
14.7
8.1
12.1
12.8
10.6
16.2
13.0
12.1
12.8
9.4
12.1
Equity
Yield
18.0 %
23.0
17.6
37.7
39.5
18.9
18.0
18.1
20.9
15.3
21.5
22.1
22.6
10.3
17.5
19.8
13.9
24.6
20.7
19.3
21.5
14.1
20.0
Historical
Year
8.2 %
10.0
6.6
16.3
16.4
7.7
8.2
8.1
11.4
8.3
7.2
9.5
7.5
N/A
N/A
8.6
0.0
6.6
13.4
9.3
9.7
8.4
10.6
Projected
Year One
8.9 %
13.2
9.2
16.4
18.0
11.7
8.8
9.2
9.9
8.1
9.8
10.4
8.1
1.5
4.0
12.3
4.3
9.8
11.4
10.6
11.0
8.7
9.9
Stabilized
Year
9.4 %
10.5
9.4
17.7
18.5
10.3
10.0
9.8
10.9
8.8
11.7
11.7
12.9
8.7
11.9
11.1
10.5
14.5
10.7
10.6
10.3
8.3
10.6
Source: HVS
Investor Interviews – During the course of our work, we continuously monitor
investor equity-yield requirements through discussions with hotel investors and
brokers. While equity still looks to yield high returns for the risk of hotel
investment, the low yield environment, coupled with increased competition for
quality assets, has placed downward pressure on equity yield returns. We find that
equity yield rates currently range from a low in the low to mid-teens for highquality, institutional-grade assets in markets with high barriers to entry to the
July-2014
90
upper teens for quality assets in more typical markets; equity yield rates tend to
near or exceed 20% for aging assets with functional obsolescence and/or other
challenging property- or market-related issues. Equity return requirements also
vary with an investment’s level of leverage. Higher loan-to-value ratios are
becoming more prevalent, allowing for increased equity returns.
Based on the assumed 60% loan-to-value ratio, the risk inherent in achieving the
projected income stream, and the age, condition, and anticipated market position
of the proposed subject property, it is our opinion that an equity investor is likely
to require an equity yield rate of 19.0%.
The lack of attainable yields on alternate investments has continued to put
downward pressure on equity yield rates, despite the desire of investors to yield
higher returns. Competition for quality assets is increasing amongst all hotel asset
types. These influences are keeping equity yields from increasing significantly.
Equity return requirements remain elevated for the more challenged hotel assets.
Terminal Capitalization
Rate
Inherent in this valuation process is the assumption of a sale at the end of the 10year holding period. The estimated reversionary sale price as of that date is
calculated by capitalizing the projected eleventh-year net income by an overall
terminal capitalization rate. An allocation for the selling expenses is deducted from
this sale price, and the net proceeds to the equity interest (also known as the
equity residual) is calculated by deducting the outstanding mortgage balance from
the reversion.
We have reviewed several recent investor surveys. The following chart
summarizes the averages presented for terminal capitalization rates in various
investor surveys during the past decade. Note that survey data lag the market and
do not necessarily reflect the most current market conditions. These data are for
the US, but the trends are relevant to the Canadian context.
July-2014
91
FIGURE 10-12 HISTORICAL TRENDS OF TERMINAL CAPITALIZATION RATES
14.0
Terminal Cap Rate (%)
13.0
12.0
11.0
10.0
9.0
8.0
PWC - Limited-Service
CRE/RERC - Second Tier
PWC - Select-Service
CRE/RERC - Third Tier
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
7.0
TABLE 10-13 TERMINAL CAPITALIZATION RATES DERIVED FROM INVESTOR
SURVEYS
Source
Data Point Range
Average
PWC Real Estate Investor Survey - 1st Quarter 2014
Limited-Service Hotels
Select-Service Hotels
8.0% - 11.0%
5.0% - 10.0%
9.3%
8.3%
USRC Hotel Investment Survey - Winter 2014
6.5% - 11.0%
9.3%
CRE/RERC Real Estate Report - Winter 2014
Second Tier Hotels
Third Tier Hotels
6.1% - 13.0%
8.0% - 16.0%
9.7%
10.9%
The terminal capitalization rate can also be derived using two other methods: the
band of investment and the debt coverage ratio.
July-2014
92
FIGURE 10-14 BAND OF INVESTMENT
Percent
of Value
Mortgage
Equity
Rate of
Return
60.0%
40.0%
x
x
Weighted
Average
0.0789
0.1400
=
=
Overall Capitalization Rate
4.7%
5.6%
10.3%
Using the previously determined mortgage constant of 0.078855 and an equity
dividend of 14.0%, the band of investment yields an overall capitalization rate of
10.3%.
FIGURE 10-15 DEBT COVERAGE RATIO
Loan to
Value Ratio
60.0%
60.0%
Mortgage
Constant
x
x
0.0789
0.0789
Debt Coverage
Ratio
x
x
2.1
2.2
Overall
Capitalization Rate
=
=
9.9%
10.4%
A debt coverage ratio of 2.1 to 2.2 yields a capitalization rate range of 9.9% to
10.4%. Generally, the terminal capitalization rate is about 50 to 100 basis points
above the going-in rate based on the risk associated with time. For the purposes of
this analysis, we have applied a terminal capitalization rate of 11.0%.
Mortgage-Equity
Method –
Value Opinion
The valuation of the mortgage and equity components is accomplished using an
algebraic equation that calculates the exact amount of debt and equity that the
hotel will be able to support based on the anticipated cash flow (as estimated by
the forecast of income and expense) and the specific return requirements
demanded by the mortgage lender (interest) and the equity investor (equity yield).
Thus, the anticipated net income (before debt service and depreciation) is
allocated to the mortgage and equity components based on market rates of return
and loan-to-value ratios. The total of the mortgage component and the equity
component equals the value of the property.
Using this method of the income capitalization approach with the variables set
forth, we estimate the value of the fee simple interest in the proposed subject
property, as of January 1, 2017, to be $10,400,000.
Mathematical Proof of
Value
July-2014
The value is mathematically proven by confirming that the market-derived yields
are met for the lender and the equity participant during the projection period.
Using the assumed financial structure set forth in the previous calculations, the
market value can be allocated between the debt and equity as follows.
93
Mortgage Component (60%)
Equity Component (40%)
Total
$6,255,000
4,170,000
$10,425,000
The annual debt service is calculated by multiplying the mortgage component by
the mortgage constant.
Mortgage Component
Mortgage Constant
Annual Debt Service
$6,255,000
0.078855
$493,238
The 11-year forecast of net income and the 10-year forecast of net income to
equity are presented in the following table.
FIGURE 10-16
11-YEAR FORECAST OF NET INCOME AND 10-YEAR FORECAST OF NET INCOME TO EQUITY
Year
Net Income Before
Debt Service
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
$866,000
1,015,000
1,163,000
1,187,000
1,211,000
1,235,000
1,260,000
1,284,000
1,310,000
1,337,000
1,364,000
Less: Debt Service
493,000
493,000
493,000
493,000
493,000
493,000
493,000
493,000
493,000
493,000
Net Income to Equity
$373,000
522,000
670,000
694,000
718,000
742,000
767,000
791,000
817,000
844,000
Debt Coverage
Ratio
Cash-on-Cash
Return
1.76
2.06
2.36
2.41
2.46
2.51
2.56
2.60
2.66
2.71
8.9 %
12.5
16.1
16.6
17.2
17.8
18.4
19.0
19.6
20.2
The net proceeds to equity upon sale of the property is determined by deducting
sale expenses (brokerage and legal fees) and the outstanding mortgage balance.
The equity residual at the end of the tenth year is calculated by deducting
brokerage and legal fees and the mortgage balance from the reversionary value.
The reversionary value is calculated as the eleventh year's net income capitalized
by the terminal capitalization rate. The calculation is shown as follows.
July-2014
94
$12,400,000
Reversionary Value ( $ 1,364,000/0.110)
Less:
Brokerage and Legal Fees
Mortgage Balance
Net Sale Proceeds to Equity
248,000
3,950,000
$8,202,000
The discount rate (before debt service), the yield to the lender, and the yield to the
equity position have been calculated by computer with the following results.
FIGURE 10-17 TOTAL PROPERTY VALUE AND INTERNAL RATES OF RETURN
Position
Total Property
Mortgage
Equity
Value
$10,425,000
$6,255,000
$4,170,000
Projected Yield
(Internal Rate of Return)
Over Holding Period
11.9 %
4.9
19.0
Note: Whereas the mortgage constant and value are calculated on the basis of
monthly mortgage payments, the mortgage yield in this proof assumes single annual
payments. As a result, the proof's derived yield may be slightly less than that actually
input.
The position of the total property yield or unlevered discount rate reflects the
current ready availability and low cost of both debt and equity capital. As of firstquarter 2014, lenders are very active, with capital available from numerous
sources. Equity and mezzanine financing is also readily available due to the
attractive yields being generated by hotels when compared with other forms of
commercial real estate.
The following tables demonstrate that the property receives its anticipated yields,
proving that the value is correct based on the assumptions used in this approach.
July-2014
95
FIGURE 10-18 VALUE OF THE MORTGAGE COMPONENT
Year
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Total Annual
Debt Service
Present Worth of $1
Factor at 4.9%
$493,000
493,000
493,000
493,000
493,000
493,000
493,000
493,000
493,000
4,443,000 *
x
x
x
x
x
x
x
x
x
x
0.952883
0.907985
0.865204
0.824438
0.785592
0.748577
0.713306
0.679697
0.647672
0.617155
Discounted
Cash Flow
=
=
=
=
=
=
=
=
=
=
$470,000
448,000
427,000
406,000
387,000
369,000
352,000
335,000
319,000
2,742,000
Value of Mortgage Component
$6,255,000
*10th year debt service of $493,000 plus outstanding mortgage balance of $3,950,000
FIGURE 10-19 VALUE OF THE EQUITY COMPONENT
Year
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Net Income
to Equity
$373,000
522,000
670,000
694,000
718,000
742,000
767,000
791,000
817,000
9,046,000 *
Present Worth of $1
Factor at 19.0%
x
x
x
x
x
x
x
x
x
x
0.840308
0.706118
0.593357
0.498602
0.418980
0.352072
0.295849
0.248604
0.208904
0.175544
Discounted
Cash Flow
=
=
=
=
=
=
=
=
=
=
$313,000
369,000
398,000
346,000
301,000
261,000
227,000
197,000
171,000
1,588,000
Value of Equity Component
$4,171,000
*10th year net income to equity of $844,000 plus sales proceeds of $8,202,000
Derived Capitalization
Rates
July-2014
The following chart summarizes the averages presented for overall capitalization
rates in various investor surveys during the past decade.
96
FIGURE 10-20 HISTORICAL TRENDS OF OVERALL CAPITALIZATION RATES
13.0
Overall Cap Rate (%)
12.0
11.0
10.0
9.0
8.0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
7.0
FIGURE 10-21 OVERALL CAPITALIZATION RATES DERIVED FROM SALES AND
INVESTOR SURVEYS
Source
Data Point Range
Average
HVS Hotel Sales - Budget/Economy
HVS Hotel Sales - Select-Service & Extended-Stay
3.3% - 17.2%
2.5% - 25.2%
8.4%
8.5%
8.0% - 10.0%
5.0% - 10.0%
9.0%
8.1%
6.25% - 11.5%
8.5%
Second Tier Hotels
Third Tier Hotels
5.8% - 13.0%
7.0% - 14.0%
9.0%
10.2%
It should be noted that the averages illustrated in the previous table are derived
from a wide array of data points and that a range of reasonableness extends both
lower and higher than the indicated data points.
July-2014
97
The following table shows the capitalization rates for the proposed subject
property that have been derived based on our estimate of market value via the
discounted cash flow analysis. Note that the stabilized year's net income is deflated
to first-year dollars.
FIGURE 10-22 DERIVED CAPITALIZATION RATES
Year
Net Operating
Income
Forecast 2017
$866,000
Deflated Stabilized
(2017) Dollars
1,118,000
Derived
Capitalization Rate
8.3 %
10.7
The derived capitalization rates are considered appropriate for a proposed lodging
facility like the Proposed Limited-Service Hotel. The derived capitalization rates
that are based on the forecasted net operating income fall in line with acceptable
returns for a hotel of this calibre. We note that these capitalization rates reflect the
expectation of continued improvement in profitability over the initial years of the
forecast. Investors are acquiring assets at low “going-in” capitalization rates with
the anticipation of a future upside as the economy continues to grow. As RevPAR
and net income levels recover, direct capitalization rates can be expected to return
to levels that are more typical.
Discounted Cash Flow
Analysis –
Prospective “When
Complete”
July-2014
The process of converting the projected income stream into an estimate of value
via the discounted cash flow method is described as follows.
1.
An appropriate discount rate is selected to apply to the projected net income
before debt service. This rate reflects the "free and clear" internal rate of
return to an all-cash purchaser or a blended rate of debt and equity return
requirements. The discount rate takes into consideration the degree of
perceived risk, anticipated inflation, market attitudes, and rates of return on
other investment alternatives, as well as the availability and cost of
financing. The discount rate is chosen by reviewing sales transactions and
investor surveys and interviewing market participants.
2.
A reversionary value reflecting the sale price of the property at the end of the
10-year holding period is calculated by capitalizing the eleventh-year net
income by the terminal capitalization rate and deducting typical brokerage
and legal fees.
98
3.
Each year's forecasted net income before debt service and depreciation and
the reversionary sale proceeds at the end of the 10-year holding period are
converted to a present value by multiplying the cash flow by the chosen
discount rate for that year in the forecast. The sum of the discounted cash
flows equates to the value of the proposed subject property.
The following chart summarizes the averages presented for discount rates in
various investor surveys during the past decade.
FIGURE 10-23 HISTORICAL TRENDS OF DISCOUNT RATES
16.0
15.0
13.0
12.0
11.0
July-2014
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
10.0
2002
Discount Rate (%)
14.0
99
FIGURE 10-24 OVERALL DISCOUNT RATES DERIVED FROM SALES AND
INVESTOR SURVEYS
Source
Data Point Range
Average
HVS Hotel Sales - Budget/Economy
HVS Hotel Sales - Select-Service & Extended-Stay
10.9% - 15.1%
9.5% - 14.1%
12.7%
11.4%
9.0% - 12.0%
9.0% - 13.0%
10.4%
11.0%
7.75% - 13.0%
11.4%
Second Tier Hotels
Third Tier Hotels
7.2% - 15.0%
8.0% - 16.0%
10.7%
11.9%
The averages illustrated in the previous table are derived from a wide array of
data points, and a range of reasonableness extends both lower and higher than the
indicated data points. Based on our review of these surveys and sale transactions
(see the total property yields shown in the table titled Sample of Hotels Sold) and
our interviews with market participants, we have selected a discount rate of
11.9% for our analysis. Similar to the developed total property yield, our selected
discount rate considers the current market for hotel investments, as well as the
characteristics of the property and market.
Using the discount rate set forth, the discounted cash flow procedure is
summarized as follows.
July-2014
100
FIGURE 10-25 DISCOUNTED CASH FLOW ANALYSIS – “WHEN COMPLETE”
Year
Net Income
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
$866,000
1,015,000
1,163,000
1,187,000
1,211,000
1,235,000
1,260,000
1,284,000
1,310,000
13,489,000 *
Discount Factor @
11.93%
0.89340
0.79817
0.71308
0.63707
0.56916
0.50849
0.45428
0.40586
0.36259
0.32394
Estimated Value
(SAY)
Reversion Analysis
11th Year's Net Income
Capitalization Rate
Discounted
Cash Flow
$773,685
810,138
829,314
756,200
689,249
627,980
572,395
521,119
474,995
4,369,626
$10,424,701
$10,400,000
$1,364,000
11.0%
Total Sales Proceeds
Less: Transaction Costs @ 2.0%
$12,400,000
248,000
Net Sales Proceeds
$12,152,000
*10th year net income of $1,337,000 plus sales proceeds of $12,152,000
Conclusion
July-2014
Using the income capitalization approach, the proposed subject property was
valued by a mortgage-equity analysis and a straightforward discounted-cash-flow
analysis. Based on our review of each method and their inherent strengths and
weaknesses, as well as investor attitudes and methodologies, we have reconciled
the prospective “when complete” value indication via the income capitalization
approach to $10,400,000.
101
11. Sales Comparison Approach
The sales comparison approach is based on the principle of substitution, which
defines a property’s value as the cost of acquiring an equally desirable substitute
(assuming that no costly delay is incurred in making the substitution). Thus, the
sales comparison approach can be used to form an opinion of a property’s market
value from the price at which equally desirable properties have sold, or for which
they can be purchased, on the open market.
Hotel Investment
Market Overview
The following overview of the hotel investment market during recent industry
investment cycles provides a context for the sales comparison approach.
The volume of hotel transactions and the price paid for individual assets are
influenced by two principal factors: the availability of capital and the performance
of the lodging sector as a whole. When high levels of leverage are available on
favourable terms and the industry is performing well, investors are attracted to
the market, and both prices and the number of transactions increase. These
market conditions often induce sellers to put their properties on the market,
further fuelling the pace of transaction activity. Conversely, when the availability
of capital declines and interest rates increase, the pace of activity and pricing
levels both decrease. When these capital conditions coincide with a downturn in
industry performance, the transaction market drops off significantly. In these
market conditions, with hospitality investments less appealing to buyers, sellers
are typically unwilling to put their properties on the market, electing to wait until
market conditions improve. The impact of these influences results in a cyclical
investment market, in which peaks and valleys are recorded in response to
changes in capital markets and the economy.
July-2014
102
FIGURE 11-1 CANADIAN HOTEL SALES SUMMARY
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Number of
Properties
27
28
49
77
122
172
36
48
40
56
55
76
111
120
165
100
62
96
100
97
130
Number of
Rooms
Total
Investment
Price Per
Room
5,937
4,056
8,455
15,638
25,947
24,090
4,411
5,760
6,405
6,297
7,159
8,221
15,713
16,932
28,255
9,558
5,330
8,191
10,058
10,710
17,002
$221,356,000
118,802,260
443,801,820
825,674,006
1,981,851,306
1,361,322,026
406,284,400
487,537,000
650,815,000
±500,000,000
447,216,100
535,323,675
1,598,651,075
2,712,589,484
4,564,522,690
1,106,530,564
±375,000,000
694,371,376
1,106,872,889
1,073,036,555
2,099,366,975
$37,284
29,290
52,490
52,799
76,381
56,510
92,107
84,642
101,610
±80,000
62,469
65,117
101,741
160,205
161,547
115,770
±70,000
85,171
112,304
104,307
123,478
Source: HVS
In Canada, the market for transactions is strong, and activity in 2013 was well
above historical averages. The high level of investment activity in 2013 is
indicative of a strong hotel sector with good liquidity and a climate where buyers
and sellers are able to agree on values. While major real estate players increased
their investment in the sector, seasoned veterans in the hotel sector saw it as a
time to get rid of non-core properties in their portfolio. Lenders remain active and
open to hotel deals, which is creating a vibrant market for trades.
The transaction record for 2013 reflects the strength in the hotel investment
market in Canada. A number of portfolio trades boosted the investment level
above $2-billion for the first time since 2006 and 2007, when two major REITs
were purchased in large portfolio transactions.
The fundamentals of the industry remain sound in 2014, and debt and equity
sources continue to be available to finance transaction activity. Although the
outlook for 2014 is positive, it is unlikely that the country will see the same
July-2014
103
number of portfolio trades that drove investment to levels beyond the historical
average in 2013. It is more likely that total investment volume in 2014 will end the
year at around $1.1-billion, in line with the historical average.
Sale History of Subject
This economic feasibility study has been prepared for the District of Vanderhoof.
As of the date of this appraisal report, there is not a specific developer attached to
the project. The current owner of the 12-acre plot of land, from which it is
assumed the subject site will be subdivided, is the District of Vanderhoof. No
transfers of the property have reportedly occurred in the past three years. The
subject site is neither under contract for sale nor listed for sale at this time.
Comparable Sales
To present our selection of comparable sales, we conducted a comprehensive
search for transactions of hotels that bear comparison to the proposed subject
hotel in one or more key areas. When possible, we gave priority to transactions
occurring in the same province or region as the proposed subject property. We
also considered factors such as operational and physical similarities to the
proposed subject hotel, including brand affiliation and revenue-generating
potential. We have primarily focussed on transactions that occurred within the last
two years because of changes in market conditions since that time.
The following transactions involved hotels that have some degree of similitude
with the proposed subject hotel.
FIGURE 11-2
REVIEW OF PERTINENT TRANSACTIONS
Property
Location
Microtel Inn & Suites Blackfalds/Red Deer
Acclaim Hotel Calgary Airport
Hospitality Inns & Suites Fort Saskatchewan
Holiday Inn Express Sherwood Park
MainStay Suites East Edmonton Sherwood Park
Hilton Garden Inn West Edmonton
Holiday Inn Express & Suites Edmonton North
Stonebridge Grand Prairie
Stonebridge Hotel Fort St. John
Pomeroy Hotel & Conference Centre
Wingate Regina
Best Western Village Park Inn Calgary
Holiday Inn Calgary Airport
Best Western Tumbler Ridge
Courtyard by Marriott Edmonton
Four Points Prince George
Super 8 Fort St. John
Blackfalds, Alberta
Calgary, Alberta
Fort Saskatchewan, Alberta
Sherwood Park, Alberta
Edmonton, Alberta
Edmonton, Alberta
Grande Prairie, Alberta
Fort St. John, British Columbia
Grande Prairie, Alberta
Regina, Saskatchewan
Calgary, Alberta
Calgary, Alberta
Tumbler Ridge, British Columbia
Edmonton, Alberta
Prince George, British Columbia
Fort St. John, British Columbia
July-2014
Sale Date
Price
Rooms
Price/Rm
Overall
Cap
Year
Opened
Dec-13
Nov-13
Aug-13
Jun-13
Aug-12
Aug-12
Jul-12
Feb-12
Feb-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Mar-11
Apr-08
Jun-07
$8,325,000
42,000,000
11,000,000
15,150,000
13,500,000
31,000,000
14,135,000
14,162,400
14,274,800
22,480,000
16,150,000
23,000,000
23,500,000
7,015,000
26,000,000
9,675,000
18,534,900
63
225
100
90
119
160
95
126
127
204
118
159
168
102
177
75
93
$132,143
186,667
110,000
168,333
113,445
193,750
148,789
112,400
112,400
110,196
136,864
144,654
139,881
68,775
146,893
129,000
199,300
—
—
9.0%
9.0%
—
6.6%
9.6%
15.0%
15.0%
2.7%
7.7%
6.8%
10.0%
—
7.8%
10.4%
—
2013
2009
2009
2004
―
2004
2006
1979
1974
1971
2008
1982
1981
―
2005
2007
2003
104
From these selected sales, we have chosen several primary transactions for further
review and consideration in the development of an indication of value via this
approach. These are illustrated in the following table.
FIGURE 11-3 SUMMARY OF SELECTED COMPARABLE SALES
Property
Location
Four Points Prince George
Fort Saskatchewan, Alberta
Edmonton, Alberta
Edmonton, Alberta
Calgary, Alberta
Prince George, British Columbia
July-2014
Sale Date
Price
Rooms
Price/Rm
Overall
Cap
Year
Opened
Aug-13
Jun-13
Aug-12
Jul-12
Oct-11
Apr-08
$11,000,000
15,150,000
31,000,000
14,135,000
23,000,000
9,675,000
100
90
160
95
159
75
$110,000
168,333
193,750
148,789
144,654
129,000
9.0%
9.0%
6.6%
9.6%
6.8%
10.4%
2009
2004
2004
2006
1982
2007
105
MAP OF PRIMARY COMPARABLE SALES
These sales are further detailed on the following pages.
July-2014
106
TRANSACTION DATA
Sale #1
Hospitality Inns &
Suites Fort
Saskatchewan
Fort Saskatchewan,
Alberta
100 Rooms
Date of Sale:
Interest Conveyed:
Buyer:
Seller:
Sales Price:
Price per Room:
Occupancy:
Average Rate:
RevPAR:
Rooms Revenue Multiplier:
Reported Capitalization Rate:
Confirmation:
August-13
Fee Simple
New Fort Inns Ltd.
Musgrave's Aspen Villa Developments Ltd.
$11,000,000
$110,000
55.0%
$132
$73
4.1
9.0%
Gettel Appraisals Ltd.
PROPERTY DATA
Year Opened:
Property Class:
Facilities:
2009
Mid-Scale
# Storeys: 4, # F&B Outlets: 1
Amenities:
Condition at Sale:
Type of Location:
Business Centre, Fitness Centre, Whirlpool
Good
Suburban
The property was built in 2008. The site is 2.82 acres.
July-2014
107
TRANSACTION DATA
Sale #2
Holiday Inn Express
Sherwood Park
Sherwood Park,
Alberta
90 Rooms
Date of Sale:
Interest Conveyed:
Buyer:
Seller:
Sales Price:
Price per Room:
Occupancy:
Average Rate:
RevPAR:
Confirmation:
June-13
Fee Simple
Temple Hotels
Lakeview Hotels & Resorts
$15,150,000
$168,333
76.9%
$140
$108
4.4
9.0%
Temple Hotels/GE Franchise Finance
PROPERTY DATA
July-2014
Year Opened:
Property Class:
Facilities:
2004
Mid-Scale
# Storeys: 4, # F&B Outlets: 1, Total SF Meeting Space: 490
Amenities:
Condition at Sale:
Type of Location:
Business Centre, Laundry/Valet, Fitness Centre, Whirlpool
Good
Suburban
108
TRANSACTION DATA
Sale #3
Hilton Garden Inn West
Edmonton
Edmonton, Alberta
160 Rooms
Date of Sale:
Interest Conveyed:
Buyer:
Seller:
Sales Price:
Price per Room:
Occupancy:
Average Rate:
RevPAR:
Confirmation:
August-12
Fee Simple
Temple REIT
Platinum Investments Ltd.
$31,000,000
$193,750
82.0%
$143
$117
4.5
6.6%
Temple REIT press release
PROPERTY DATA
Year Opened:
Property Class:
Facilities:
2004
First Class
# Storeys: 6, # F&B Outlets: 2, Total SF Meeting Space: 4,049
Amenities:
Business Centre, Laundry/Valet, Room Service, Gift Shop, Indoor
Pool, Fitness Centre, Whirlpool
Very Good
Suburban
Condition at Sale:
Type of Location:
The hotel will undergo a $2-million refurbishment over 18 months that will include the
guestrooms, the lobby, and the public areas. Following the sale, the property will be
managed by Atlific Hotels & Resorts. The transaction was financed with a $22-million first
mortgage at 5.3% for a 3-year term with a 25-year amortization.
July-2014
109
TRANSACTION DATA
Sale #4
Holiday Inn Express &
Suites Edmonton North
Edmonton, Alberta
95 Rooms
Date of Sale:
Interest Conveyed:
Buyer:
Seller:
Sales Price:
Price per Room:
Occupancy (Jan 1, 2011 - Dec 31, 2011):
Average Rate (Jan 1, 2011 - Dec 31, 2011):
RevPAR (Jan 1, 2011 - Dec 31, 2011):
Confirmation:
July-12
Fee Simple, Leased Fee
1683799 Alberta Ltd. (Fayaz Dhanji)
North Edmonton Inn & Suites Ltd. (Zul Damani)
$14,135,000
$148,789
68.0%
$123
$84
4.9
9.6%
Gettel Appraisers
PROPERTY DATA
Year Opened:
Property Class:
Facilities:
2006
Mid-Scale
Amenities:
Business Centre, Laundry/Valet, Concierge, Indoor Pool,
Whirlpool
Good
Urban
Condition at Sale:
Type of Location:
The hotel was flagged as a Holiday Inn Express in 2011.
July-2014
110
TRANSACTION DATA
Sale #5
Best Western Village
Park Inn Calgary
Calgary, Alberta
159 Rooms
Date of Sale:
Interest Conveyed:
Buyer:
Seller:
October-11
Fee Simple
PI - Rahim Lakhoo
Sales Price:
Price per Room:
RevPAR (Jan 1, 2010 - Dec 31, 2010):
Confirmation:
Royal Host Inc.
$23,000,000
$144,654
72.2%
$109
$78
5.1
6.8%
Colliers
PROPERTY DATA
Year Opened:
Property Class:
Facilities:
1982
Mid-Scale
Amenities:
Business Centre, Laundry/Valet, Garage/Parking, Indoor Pool,
Whirlpool
Good
Suburban
Condition at Sale:
Type of Location:
July-2014
111
TRANSACTION DATA
Sale #6
Four Points Prince
George
Prince George, British
Columbia
75 Rooms
Date of Sale:
Interest Conveyed:
Buyer:
Seller:
Sales Price:
Price per Room:
RevPAR (Jan 1, 2007 - Dec 31, 2007):
Confirmation:
April-08
Fee Simple
Lakeview Hotel REIT
657180 BC Ltd.
$9,675,000
$129,000
76.0%
$131
$99
3.6
10.4%
Colliers
PROPERTY DATA
Year Opened:
Property Class:
Facilities:
2007
First Class
# Storeys: 3, # F&B Outlets: 1, Total SF Meeting Space: 860
Amenities:
Business Centre, Airport Shuttle, Laundry/Valet, Room Service,
Fitness Centre
Good
Suburban
Condition at Sale:
Type of Location:
The hotel opened on June 28, 2007. Occupancy and average room rate were forecasted one
year before the purchase of the property.
July-2014
112
The following table sets forth the adjustment grid used to account for differences
between the transacted properties and the proposed subject hotel.
Review of Comparable
Sales
FIGURE 11-4 COMPARABLE SALES ADJUSTMENT GRID
Elements of Comparison
Sale Price
Number of Rooms
Price per Room
Year Open
Date of Sale
Proposed Subject Property
80
2017
Jan-17
Sale #1
Sale #2
Hospitality Inns &
Suites Fort
Saskatchewan, Fort
Saskatchewan, Alberta
Holiday Inn Express
Sherwood Park,
Sherwood Park,
Alberta
Sale #3
Sale #4
Holiday Inn Express &
Hilton Garden Inn West
Suites Edmonton
Edmonton, Edmonton,
North, Edmonton,
Alberta
Alberta
Sale #5
Sale #6
Best Western Village
Park Inn Calgary,
Calgary, Alberta
Four Points Prince
George, Prince
George, British
Columbia
$11,000,000
100
$110,000
2009
August-13
$15,150,000
90
$168,333
2004
June-13
$31,000,000
160
$193,750
2004
August-12
$14,135,000
95
$148,789
2006
July-12
$23,000,000
159
$144,654
1982
October-11
$9,675,000
75
$129,000
2007
April-08
Fee Simple
Fee Simple
Fee Simple
Fee Simple, Leased
Fee
Fee Simple
Fee Simple
Adjustments for Transaction Characteristics (Per Room)
Property Rights Conveyed
Fee Simple
Adjustment
Adjusted Sales Price
0.0 %
110,000
0.0 %
168,333
0.0 %
193,750
(5.0) %
141,350
(15.0) %
122,956
0.0 %
129,000
Financing Terms
Adjustment
Cash Equivalent
0.0 %
110,000
Cash Equivalent
0.0 %
168,333
Cash Equivalent
0.0 %
193,750
Cash Equivalent
0.0 %
141,350
Cash Equivalent
0.0 %
122,956
Cash Equivalent
0.0 %
129,000
Conditions of Sale
Adjustment
Normal
0.0 %
110,000
Normal
0.0 %
168,333
Normal
0.0 %
193,750
Normal
0.0 %
141,350
Normal
0.0 %
122,956
Normal
0.0 %
129,000
Market Conditions
Adjustment
Similar
0.0 %
110,000
Similar
0.0 %
168,333
Similar
0.0 %
193,750
Similar
0.0 %
141,350
Similar
0.0 %
122,956
Similar
0.0 %
129,000
Adjusted Price
$110,000
$168,333
$193,750
$141,350
$122,956
$129,000
Adjustments for Property Characteristics
Market Orientation (RevPAR)
Adjustment
Net Adjust. for Property Characteristics
Adjusted Price Per Room
$82.09
$72.60
13.1 %
14,380
$124,380
$107.74
(23.8) %
(40,080)
$128,253
$117.26
(30.0) %
(58,111)
$135,639
$83.64
(1.9) %
(2,618)
$138,732
$78.50
4.6 %
5,631
$128,587
$99.20
(17.2) %
(22,244)
$106,756
Property Rights
Conveyed
The purpose of this assignment is the valuation of the fee simple interest in the
proposed subject property. This adjustment accounts for differences between the
interests that transferred in each comparable sale and those which form the
subject of the appraisal. A downward adjustment for property rights conveyed is
necessary for the transactions in which a leased fee interest was conveyed in
addition to the fee simple interest.
RevPAR Adjustments
Hotels are purchased and sold on their ability to generate revenue and net income.
Thus, we find that a reliable way to adjust hotel sales is by comparing RevPARs.
Revenue per available room inherently reflects the relative revenue-producing
ability of each of the comparable sales, the primary consideration of hotel
purchasers. The best way to adjust comparable hotel sales is to calculate the
difference between a comparable hotel’s RevPAR at the time of sale with the
proposed subject hotel’s deflated stabilized-year RevPAR. RevPAR adjustments
July-2014
113
also inherently account for differences in physical condition and the passage of
time. As such, we have adjusted the per-room sales price for each sale by the
percentage differential between the proposed subject hotel’s deflated, stabilizedyear RevPAR and that of each property at the time of its sale.
Conclusion
July-2014
Prior to the adjustments, the comparable sales transacted for amounts ranging
from $110,000 to $194,000 per room. Following all the adjustments, we have
positioned the appropriate value range at $107,000 to $139,000 per room, which
equates to a value range of $8,500,000 to $11,100,000 for the 80-room proposed
subject property.
114
12. Cost Approach
The cost approach is applicable to new and proposed hotels. In this report section,
we will estimate the development cost of the improvements, estimate the market
value of the site, and add an entrepreneurial profit incentive to arrive at the total
cost new to develop the proposed subject property. The total cost new to build the
facility is often used by hotel buyers as a benchmark against the income and sales
indications, particularly for new hotels.
Land Valuation
Land value may be estimated in a variety of ways, including the sales comparison
approach and the allocation, extraction, or ground rent capitalization methods. For
the majority of hostelry properties, the two primary methods used are the sales
comparison approach and the ground lease capitalization approach.
Ground Lease
Approach to Land
Value
Hotels and resorts are routinely constructed on leased land. Although the lease
terms differ somewhat from property to property, the basis for the rental
calculation is often tied to a percentage of revenue formula. Using the forecasted
revenues for the proposed subject property and applying a typical hotel ground
lease rental formula, the appraiser can determine the hotel's economic rental, or
what can be termed the income attributed to the land. The land value can then be
estimated by capitalizing the hypothetical ground rent. The self-adjusting aspect of
this approach is the key to its reliability.
We have researched actual long-term ground leases encumbering hotels. Our
analysis of these ground lease rental formulas indicates that economic ground
rents for hotels like the proposed subject property typically range from 2.0% to
5.0% of rooms revenue. Hotels with significant land relative to room count, hotels
in resort areas, and hotels in land-sparse downtown markets may command
higher ground rent.
Based on the revenue projections set forth for the proposed subject property as
part of this appraisal, the following table shows how the economic ground rent has
been calculated. We have utilized a ground rent percentage of 2.0% in our analysis.
Note that the stabilized revenue level has been deflated back to first-projectionyear dollars.
July-2014
Cost Approach
115
Discounted Stabilized Rooms Revenue
Rental Percentage
$2,594,195
2.0%
Economic Ground Rent
$51,884
Rent generated from an unsubordinated ground lease represents a low-risk flow of
income. Because the tenant improvements typically amount to more than five
times the value of the land, the risk of default is almost nonexistent. For hotel
ground leases where rent is tied to revenue, the landlord is also protected from the
adverse effects of inflation. Based on these minimal risk factors, the current cost of
long-term capital, and our analysis of the proposed subject property, we have
selected a capitalization rate of 8.0%.
Applying this capitalization rate to the proposed subject property's economic
ground rent results in the following estimate of land value.
Economic Ground Rent
Capitalization Rate
=
$51,884
=
8.0%
$600,000
Land Value Conclusion
Our opinion of land value at $600,000 is roughly 5.8% of the proposed subject
property's total development cost.
Development Cost
The proposed subject property will feature 80 guestrooms, a breakfast dining area,
an exercise room, a business center, vending areas, and a guest laundry room, as
well as all the necessary back-of-the-house space.
One of the nationally recognized authorities on cost information is Marshall &
Swift. HVS uses Marshall & Swift's Commercial Estimator software, which employs
the square-foot method in cost estimating. This approach approximates the
development cost of a building's major components in terms of dollars per unit of
area or volume based on the known costs of similar structures adjusted for time
and physical differences. The estimate of development cost by this method
includes all direct costs plus a portion of indirect costs, such as construction
financing, temporary utilities, and general conditions.
For the purpose of developing a cost estimate using the Marshall & Swift
Commercial Estimator program, the total building area is 44,800 square feet.
Based on this expanse as well as location and time adjustment factors and other
criteria related to building systems, the Commercial Estimator program estimates
the construction cost of the building to be $5,834,000.
July-2014
Cost Approach
116
In addition to the cost of the building, we estimated the costs of additional site
improvements: the parking, the signage, and the landscaping.
We have also considered indirect costs, such as lender fees, taxes, development
fees, and other costs associated with development. We estimate these indirect
costs to be 15% of the total building cost (including the cost of the site
improvements).
The calculation of the total development cost is shown in the following table.
FIGURE 12-2 BUILDING COST
Improvement
Cost
Building Cost Per Marshall & Swift
Parking
Signage
Landscaping
$5,834,000
80,000
150,000
220,000
Total Building Costs
Indirect Costs (at 15%)
Total Replacement Costs
$6,284,000
942,600
$7,226,600
Opening Costs
Opening costs must also be considered. Opening costs include the pre-opening
marketing and administrative expenditures of the hotel and a working capital
reserve to maintain an adequate cash flow until the operation achieves a breakeven point. HVS has estimated ranges for these expenses. The proposed subject
hotel’s pre-opening costs and working capital are estimated at $4,000 per room, or
$320,000 for the entire property.
Personal Property
To estimate the cost of furniture, fixtures, and equipment, we surveyed the
personal property of typical limited-service hotels. Following this survey, we
estimate the cost of the proposed subject property's furniture, fixtures, and
equipment to be roughly $15,000 per room, or $1,200,000 in total.
Development Cost
Summary
Based on the preceding analyses, we estimate the development cost of the
proposed subject property as follows, prior to the inclusion of the land value and
any developer’s profit.
July-2014
Cost Approach
117
FIGURE 12-3 DEVELOPMENT COST SUMMARY
Item
Cost per Room
Building
Furniture, Fixtures, & Equipment
Pre-Opening Costs & Working Capital
Total Replacement Cost
Allocation of
Developer's Profit
Cost
$90,333
15,000
4,000
$7,226,600
1,200,000
320,000
$109,333
$8,746,600
Developer's profit represents the entrepreneurial incentive that hotel developers
anticipate to induce the construction of a new hotel project. As a result of
economic conditions in the hotel industry, developer's profit has not always been
in evidence. If the economic value of a new hotel does not exceed the development
cost, indicating that developers will not earn any profit from their effort, the
project is unlikely to be completed because the financial incentive is not present.
It is our opinion that a 10.0% developer's profit is reasonable to reflect the
financial incentive for a new hotel development in the subject market. Developer's
profit is applied as follows to the cost of the building (including opening costs); the
furniture, fixtures, and equipment; and the land.
FIGURE 12-4 ALLOCATION OF DEVELOPER'S PROFIT
Item
Profit Percentage
Building, Pre-Opening, Soft Costs
Land Value
Total Developer's Incentive
Conclusion
July-2014
10.0 %
10.0
10.0
Cost
$7,546,600
1,200,000
600,000
Developer's Profit
$754,660
120,000
60,000
$934,660
To estimate the development cost for the proposed subject property, the costs of
several components of the total property were quantified. The land value was
estimated using the ground lease approach, and the development cost of the
building improvements was estimated based on building costs provided by
Marshall & Swift Commercial Cost Estimator Software. A developer’s incentive was
also quantified. The following table summarizes our estimate of the total cost new
to build the proposed subject property.
Cost Approach
118
FIGURE 12-5 RECAP OF TOTAL DEVELOPMENT COST ESTIMATE
Item
Building
Pre-Opening Costs & Working Capital
Land
Developer's Incentive
Total Replacement Cost
Cost
$7,226,600
1,200,000
320,000
600,000
934,660
$10,300,000
Say: $10,300,000
Knowledgeable hotel buyers generally base their purchase decisions on economic
factors such as projected net income and return on investment. Because the cost
approach does not reflect these income-related considerations and also requires a
number of highly subjective estimates, it is our opinion that the cost approach is
not reliable for estimating the market value of the proposed subject property.
Although the data used to compile this estimate is generally reliable, only a rough
indication of what the development cost may be is provided here. Individuals who
require an accurate cost estimate should retain the services of a professional
construction cost estimator.
To determine the feasibility of the project, the development cost is compared to
the prospective market value via the income approach as of the date of completion.
If the income value is equal to or exceeds the development cost, including a
reasonable developer’s profit, the feasibility of the project is confirmed. Based on
the analysis and parameters outlined in this report, the feasibility of the proposed
subject property is confirmed.
July-2014
Cost Approach
119
13. Reconciliation of Value Indications
The reconciliation, which is the last step in the appraisal process, involves
summarizing and correlating the data and procedures employed throughout the
analysis. The final value conclusion is arrived at after reviewing the estimates
indicated by the income capitalization, sales comparison, and cost approaches. The
relative significance, applicability, and defensibility of each indicated value are
considered, and the greatest weight is given to that approach deemed most
appropriate for the property being appraised.
The purpose of this report is to estimate the market value of the fee simple interest
in the proposed subject property. Our appraisal involves a careful analysis of the
property itself and the economic, demographic, political, physical, and
environmental factors that influence real estate values.
Income Capitalization
Approach
To estimate the proposed subject property's value via the income capitalization
approach, we have analyzed the local market for transient accommodations,
examined the competitive environment, projected occupancy and average rate
levels, and developed a forecast of income and expense that reflects anticipated
income trends and cost components through a stabilized year of operation. The
proposed subject property's projected net income before debt service was
allocated to the mortgage and equity components based on market rates of return
and loan-to-value ratios. Through a discounted cash flow and income
capitalization procedure, the value of each component was calculated; the total of
the mortgage and equity components equates to the value of the property.
Our nationwide experience indicates that the procedures used in estimating
market value by the income capitalization approach are comparable to those
employed by the hotel investors who constitute the marketplace. For this reason,
we believe that the income capitalization approach produces the most supportable
value estimate, and it is given the greatest weight in our final estimate of the
proposed subject property's market value.
Sales Comparison
Approach
July-2014
The sales comparison approach uses actual sales of similar properties to provide
an indication of the proposed subject property's value. Although we have
investigated a number of sales in an attempt to develop a range of value
indications, several adjustments are necessary to render these sale prices
applicable to the proposed subject property. The adjustments, which tend to be
subjective, diminish the reliability of the sales comparison approach. Moreover,
typical hotel investors employ a sales comparison procedure only to establish
broad value parameters.
120
The hotel sales outlined earlier in this report indicate an adjusted value range of
$107,000 to $139,000 per available room. This information supports the value
indicated by the income capitalization approach.
Cost Approach
The cost approach is particularly applicable to proposed hotels, so it has been
given consideration in our reconciliation process.
Value Conclusion
Careful consideration has been given to the strengths and weaknesses of the three
approaches to value discussed above. In recognition of the purpose of this
appraisal, we have given primary weight to the value indicated by the income
capitalization approach.
Based on our analysis, it is our opinion that the prospective “when complete”
market value of the fee simple interest in the real and personal property of the
Proposed Limited-Service Hotel, as of January 1, 2017, will be:
$10,400,000
TEN MILLION FOUR HUNDRED THOUSAND DOLLARS
This value estimate equates to $130,000 per room (rounded). The estimate of
market value includes the land, the improvements, and the furniture, fixtures, and
equipment. The appraisal assumes that the proposed subject hotel is open and
operational on the assumed opening date.
We have made no assumptions of hypothetical conditions in our report. The
analysis is based on the extraordinary assumption that the described
July-2014
121
Feasibility Conclusion
In determining the potential feasibility of the Proposed Limited-Service Hotel, we
analyzed the lodging market, researched the area’s economics, reviewed the
estimated development cost, and prepared a 10-year forecast of income and
expense, which was based on our review of the current and historical market
conditions, as well as comparable income and expense statements.
Based on the analysis and parameters outlined in this report, the feasibility of the
proposed subject property is confirmed.
July-2014
122
14. Statement of Assumptions and Limiting Conditions
1.
We note that the development of our value opinion(s) for the proposed
subject property assumes this extraordinary assumption: specifically that
the described improvements have been completed as of the date of value.
The reader should understand that
a. The improved subject property does not yet, in fact, exist as of the
date of appraisal;
b. Certain events need to occur, as disclosed in the report, before the
property appraised with the proposed improvements will in fact
exist; and
c. The financial analysis presented in this report is based upon
assumptions, estimates, and evaluations of the market conditions
in the local and national economy, which may be subject to sharp
rises and declines. Over the projection period considered in our
analysis, wages and other operating expenses may increase or
decrease due to market volatility and economic forces outside the
control of the hotel’s management. We assume that the price of
hotel rooms, food, beverages, and other sources of revenue to the
hotel will be adjusted to offset any increases or decreases in related
costs. We do not warrant that our estimates will be attained, but
they have been developed on the basis of information obtained
during the course of our market research, and they are intended to
reflect the expectations of a typical hotel buyer as of the stated
date(s) of valuation.
July-2014
2.
This report is to be used in whole and not in part.
3.
No responsibility is assumed for matters of a legal nature, nor do we render
any opinion as to title, which is assumed to be marketable and free of any
deed restrictions and easements. The property is evaluated as though free
and clear unless otherwise stated.
4.
We assume that there are no hidden or unapparent conditions of the sub-soil
or structures, such as underground storage tanks, that would impact the
property’s development potential. No responsibility is assumed for these
conditions or for any engineering that may be required to discover them.
123
July-2014
5.
We have not considered the presence of potentially hazardous materials or
any form of toxic waste on the project site. The consultants are not qualified
to detect hazardous substances, and we urge the client to retain an expert in
this field if desired.
6.
We have made no survey of the site, and we assume no responsibility in
connection with such matters. Sketches, photographs, maps, and other
exhibits are included to assist the reader in visualizing the property. It is
assumed that the use of the described real estate will be within the
boundaries of the property described and that no encroachment will exist.
7.
All information, financial operating statements, estimates, and opinions
obtained from parties not employed by MM&R Valuation Services, Inc. are
assumed to be true and correct. We can assume no liability resulting from
misinformation.
8.
Unless noted, we assume that there are no encroachments, zoning violations,
or building violations encumbering the subject property.
9.
The property is assumed to be in full compliance with all applicable federal,
provincial, local, and private codes, laws, consents, licences, and regulations
(including a liquor licence where appropriate), and it is assumed that all
licences, permits, certificates, franchises, and so forth can be freely renewed
or transferred to a purchaser.
10.
All mortgages, liens, encumbrances, leases, and servitudes have been
disregarded unless specified otherwise.
11.
None of this material may be reproduced in any form without our written
permission, and the report cannot be disseminated to the public through
advertising, public relations, news, sales, or other media.
12.
We are not required to give testimony or attend court by reason of this
analysis without previous arrangements, and we will make such
appearances only when our standard per-diem fees and travel costs are paid
in advance.
13.
If the reader is making a fiduciary or individual investment decision and has
any questions concerning the material presented in this report, it is
recommended that the reader contact us.
14.
We take no responsibility for any events or circumstances that take place
subsequent to either the date of value or the date of our field inspection,
whichever occurs first.
124
July-2014
15.
The quality of a lodging facility's on-site management has a direct effect on a
property's economic viability. The financial forecasts presented in this
analysis assume responsible ownership and competent management. Any
departure from this assumption may have a significant impact on the
projected operating results.
16.
This analysis assumes continuation of all Canada Customs and Revenue
Agency tax code provisions as stated or interpreted on either the date of
value or the date of our field inspection, whichever occurs first.
17.
Many of the figures presented in this report were generated using
sophisticated computer models that make calculations based on numbers
carried out to three or more decimal places. In the interest of simplicity,
most numbers have been rounded to the nearest tenth of a percent. Thus,
these figures may be subject to small rounding errors.
18.
It is agreed that our liability to the client is limited to the amount of the fee
paid as liquidated damages. Our responsibility is limited to the client, and
use of this report by third parties shall be solely at the risk of the client
and/or third parties. The use of this report is also subject to the terms and
conditions set forth in our engagement letter with the client.
19.
Evaluating and comprising financial forecasts for hotels is both a science and
an art. Although this analysis employs various mathematical calculations to
provide value indications, the final forecasts are subjective and may be
influenced by our experience and other factors not specifically set forth in
this report.
20.
Our report was prepared in accordance with, and is subject to, the
requirements of the Canadian Uniform Standards of Professional Practice
(CUSPAP), as provided by the Appraisal Institute of Canada.
21.
This study was prepared by MM&R Valuation Services, Inc. All opinions,
recommendations, and conclusions expressed during the course of this
assignment are rendered by the staff of MM&R Valuation Services, Inc. as
employees, not as individuals.
125
15. Certification
The undersigned hereby certify that to the best of our knowledge and belief
July-2014
1.
the statements of fact presented in this report are true and correct;
2.
the reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
impartial, and unbiased professional analyses, opinions, and conclusions;
3.
we have no (or the specified) present or prospective interest in the
property that is the subject of this report and no (or the specified) personal
interest with respect to the parties involved;
4.
we have no bias with respect to the property that is the subject of this
report or to the parties involved with this assignment;
5.
our engagement in this assignment was not contingent upon developing or
reporting predetermined results, the amount of the value estimate, or a
conclusion favouring the client;
6.
we have the knowledge and experience to complete the assignment
competently;
7.
our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Canadian Uniform Standards of
Professional Appraisal Practice;
8.
Eric Wright personally inspected the property described in this report;
Carrie Russell, AACI, MAI, RIBC, participated in the analysis and reviewed
the findings but did not personally inspect the property;
9.
no one provided significant professional assistance to the persons signing
this report;
10.
the reported analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the requirements of the Code
of Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute of Canada;
11.
the undersigned are all members in good standing of the Appraisal
Institute of Canada; and
Certification
126
12.
the undersigned have fulfilled the requirements of the Appraisal Institute
of Canada Continuing Professional Development Program for members as
of the date of this report.
Eric Wright
Senior Associate
Carrie Russell, AACI, MAI, RIBC
Managing Director
July-2014
Certification
127
Let us illustrate the penetration adjustment with an example.
A market has three existing hotels with the following operating statistics:
BASE-YEAR OCCUPANCY AND PENETRATION LEVELS
Property
Number
of Rooms
Hotel A
Hotel B
Hotel C
100
125
200
23.5 %
29.4
47.1
60 %
70
30
20 %
10
60
20 %
20
10
75.0 %
65.0
80.0
100.8 %
87.4
107.5
Totals/Average
425
100.0 %
47 %
38 %
15 %
74.4 %
100.0 %
Fair Share
Commercial
Meeting and
Group
Leisure
Occupancy
Penetration
Based upon each hotel’s room count, market segmentation, and annual occupancy,
the annual number of room nights accommodated in the market from each market
segment can be quantified, as set forth below.
MARKET-WIDE ROOM NIGHT DEMAND
Market
Segment
Commerci a l
Meeti ng a nd Group
Lei s ure
Total
Annual Room
Night
Demand
Percentage of
Total
54,704
43,481
17,246
47.4 %
37.7
14.9
115,431
100.0 %
The following discussion will be based upon an analysis of the commercial market
segment. The same methodology is applied for each market segment to derive an
estimate of a hotel’s overall occupancy. The table below sets forth the commercial
demand accommodated by each hotel. Each hotel’s commercial penetration factor
is computed by:
July-2014
i
1) calculating the hotel’s market share % of commercial demand (commercial
room nights accommodated by subject hotel divided by total commercial room
nights accommodated by all hotels) and
2) dividing the hotel’s commercial market share % by the hotel’s fair share %.
The following table sets forth each hotel’s fair share, commercial market share,
and commercial penetration factor.
COMMERCIAL SEGMENT PENETRATION FACTORS
Property
Number
of Rooms
Hotel A
Hotel B
Hotel C
100
125
200
23.5 %
29.4
47.1
16,425
20,759
17,520
30.0 %
37.9
32.0
127.6 %
129.0
68.1
Totals/Average
425
100.0 %
54,704
100.0 %
100.0 %
Fair Share
Commercial
Capture
Commercial
Market Share
Commercial
Penetration
If a new 100-room hotel enters the market, the fair share of each hotel changes
because of the new denominator, which has increased by the 100 rooms that have
been added to the market.
COMMERCIAL SEGMENT FAIR SHARE
Property
Number of
Rooms
Fair Share
Hotel A
Hotel B
Hotel C
New Hotel
100
125
200
100
19.0 %
23.8
38.1
19.0
Total
525
100.0 %
The new hotel’s penetration factor is projected for its first year of operation. It is
estimated that the hotel will capture (penetrate) only 85% of its fair share as it
establishes itself in the market. The new hotel’s market share and room night
capture can be calculated based upon the hotel’s estimated penetration factor.
When the market share of the existing hotels and that of the new hotel are added
up, they no longer equal 100% because of the new hotel’s entry into the market.
The market share of each hotel must be adjusted to reflect the change in the
denominator that comprises the sum of each hotel’s market share.
July-2014
ii
This adjustment can be mathematically calculated by dividing each hotel’s market
share percentages by the new denominator of 97.1%. The resulting calculations
reflect each hotel’s new adjusted market share. The sum of the adjusted market
shares equals 100%, indicating that the adjustment has been successfully
completed. Once the market shares have been calculated, the penetration factors
can be recalculated (adjusted market share divided by fair share) to derive the
adjusted penetration factors based upon the new hotel’s entry into the market.
Note that each existing hotel’s penetration factor actually increases because the
new hotel is capturing (penetrating) less than its fair share of demand.
COMMERCIAL SEGMENT PROJECTIONS (YEAR 1)
Property
Number
of Rooms
Fair Share
Hotel A
Hotel B
Hotel C
New Hotel
100
125
200
100
19.0 %
23.8
38.1
19.0
Totals/Average
525
100.0 %
Hist./Proj.
Penetration
Factor
127.6 %
129.0
68.1
85.0
Hist./Proj.
Market
Share
Adjusted
Market
Share
24.3 %
30.7
25.9
16.2
25.0 %
31.6
26.7
16.7
97.1 %
100.0 %
Adjusted
Penetration
Factor
Projected
Capture
131.4 %
132.8
70.1
87.5
13,688
17,299
14,600
9,117
54,704
In its second year of operation, the new hotel is projected to penetrate above its
fair share of demand. A penetration rate of 130% has been chosen, as the new
hotel is expected to perform at a level commensurate with Hotel A and Hotel B in
this market segment. The same calculations are performed to adjust market share
and penetration factors. Note that now the penetration factors of the existing
hotels decline below their original penetration rates because of the new hotel’s
above-market penetration. Also, note that after the market share adjustment, the
new hotel retains a penetration rate commensurate with Hotel A and Hotel B,
though the penetration rates of all three hotels have declined by approximately
nine percentage points because of the reapportionment of demand.
Once the market shares of each hotel have been adjusted to reflect the entry of the
new hotel into the market, the commercial room nights captured by each hotel
may be projected by multiplying the hotel’s market share percentage by the total
commercial room-night demand. This calculation is shown below.
July-2014
iii
COMMERCIAL SEGMENT PROJECTIONS (YEAR 2)
Property
Number
of Rooms
Fair Share
Hotel A
Hotel B
Hotel C
New Hotel
100
125
200
100
19.0 %
23.8
38.1
19.0
Totals/Average
525
100.0 %
July-2014
Hist./Proj.
Penetration
Factor
131.4 %
132.8
70.1
130.0
Hist./Proj.
Market
Share
Adjusted
Market
Share
25.0 %
31.6
26.7
24.8
23.1 %
29.3
24.7
22.9
108.1 %
100.0 %
Adjusted
Penetration
Factor
Projected
Capture
121.5 %
122.9
64.8
120.3
12,662
16,004
13,507
12,531
54,704
iv
The algebraic equation known as the simultaneous valuation formula, which
solves for the total property value using a 10-year mortgage and equity technique,
was developed by Suzanne R. Mellen, CRE, MAI, FRICS, ISHC, Managing Director of
the San Francisco office of HVS. A complete discussion of the technique is
presented in her article entitled “Simultaneous Valuation: A New Technique.”14
The process of solving for the value of the mortgage and equity components begins
by deducting the annual debt service from the projected income before debt
service, leaving the net income to equity for each year. The net income as of the
eleventh year is capitalized into a reversionary value using the terminal
capitalization rate. The equity residual, which is the total reversionary value less
the mortgage balance at that point in time and less any brokerage and legal costs
associated with the sale, is discounted to the date of value at the equity yield rate.
The net income to equity for each projection year is also discounted back to the
date of value. The sum of these discounted values equals the value of the equity
component. Because the equity component comprises a specific percentage of the
total value, the value of the mortgage and the total property can be computed
easily. This process can be expressed in two algebraic equations that set forth the
mathematical relationships between the known and unknown variables using the
following symbols.
Suzanne R. Mellen, "Simultaneous Valuation: A New Technique," Appraisal Journal
(April 1983).
14
July-2014
v
NI
=
Net income available for debt service
V
=
Value
M
=
Loan-to-value ratio
f
=
Annual debt service constant
n
=
Number of years in the projection period
de
=
Annual cash available to equity
dr
=
Residual equity value
b
=
Brokerage and legal cost percentage
P
=
Fraction of the loan paid off during the projection
period
fp
=
Annual constant required to amortize the entire loan
during the projection period
Rr
=
Overall terminal capitalization rate that is applied to
net income to calculate the total property reversion
(sales price at the end of the projection period)
1/Sn
=
Present worth of $1 factor (discount factor) at the
equity yield rate
Using these symbols, the following formulas can be used to express some of the
components of this mortgage and equity valuation process.
Debt Service – A property's debt service is calculated by first determining the
mortgage amount that equals the total value (V) multiplied by the loan-to-value
ratio (M). Debt service is derived by multiplying the mortgage amount by the
annual debt service constant (f). The following formula represents debt service.
f x M x V = Debt Service
Net Income to Equity (Equity Dividend) – The net income to equity (de) is the
property's net income before debt service (NI) less debt service. The following
formula represents the net income to equity.
NI - (f x M x V) = de
Reversionary Value – The value of the hotel at the end of the tenth year is
calculated by dividing the eleventh-year net income before debt service (NI11) by
the terminal capitalization rate (Rr). The following formula represents the
property's tenth-year reversionary value.
July-2014
vi
(NI11/Rr) = Reversionary Value
Brokerage and Legal Costs – When a hotel is sold, certain costs are associated
with the transaction. Normally, the broker is paid a commission and the attorney
collects legal fees. In the case of hotel transactions, brokerage and legal costs
typically range from 1% to 4% of the sales price. Because these expenses reduce
the proceeds to the seller, they are usually deducted from the reversionary value
in the mortgage and equity valuation process. Brokerage and legal costs (b),
expressed as a percentage of reversionary value (NI11/Rr), are calculated by
application of the following formula.
b (NI11/Rr) = Brokerage and Legal Costs
Ending Mortgage Balance – The mortgage balance at the end of the tenth year
must be deducted from the total reversionary value (debt and equity) in order to
determine the equity residual. The formula used to determine the fraction of the
loan remaining (expressed as a percentage of the original loan balance) at any
point in time (P) takes the annual debt service constant of the loan over the entire
amortization period (f) less the mortgage interest rate (i), and divides it by the
annual constant required to amortize the entire loan during the 10-year projection
period (fp) less the mortgage interest rate. The following formula represents the
fraction of the loan paid off (P).
(f - i)/(fp - i) = P
If the fraction of the loan paid off (expressed as a percentage of the initial loan
balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending
mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the
initial loan amount (M x V). The following formula represents the ending mortgage
balance.
(1 - P) x M x V
Equity Residual Value – The value of the equity upon the sale at the end of the
projection period (dr) is the reversionary value less the brokerage and legal costs
and the ending mortgage balance. The following formula represents the equity
residual value.
(NI11/Rr) - (b (NI11/Rr) - ((1 - P) x M x V) = dr
Annual Cash Flow to Equity – The annual cash flow to equity consists of the
equity dividend for each projection year plus the equity residual at the end of the
tenth year. The following formula represents the annual cash flow to equity.
July-2014
vii
NI1 - (f x M x V) = de1
NI2 - (f x M x V) = de2
NI10 - (f x M x V) = de10
(NI11/Rr) - (b (NI11/Rr) - ((1 - P) x M x V) = dr
Value of the Equity – If the initial mortgage amount is calculated by multiplying
the loan-to-value ratio (M) by the property value (V), then the equity value is one
minus the loan-to-value ratio multiplied by the property value. The following
formula represents the value of the equity.
(1 - M) V
Discounting the Cash Flow to Equity to the Present Value – The cash flow to
equity in each projection year is discounted to the present value at the equity yield
rate (1/Sn). The sum of these cash flows is the value of the equity (1 - M) V. The
following formula represents the calculation of equity as the sum of the discounted
cash flows.
(de1 x 1/S1) + (de2 x 1/S2) + . . . + (de10 x 1/S10) + (dr x 1/S10) = (1 - M) V
Combining the Equations: Annual Cash Flow to Equity and Discounting the
Cash Flow to Equity to the Present Value – The last step is to arrive at one
overall equation that shows that the annual cash flow to equity plus the yearly
discounting to the present value equals the value of the equity.
((NI1 - (f x M x V)) 1/S1) + ((NI2 - (f x M x V)) 1/S2) + . . .
((NI10 - (f x M x V)) 1/S10) +
(((NI11/Rr) - (b (NI11/Rr)) - ((1 - P) x M x V)) 1/S10) = (1 -M) V
Because the only unknown in this equation is the property's value (V), it can be
solved readily.
Ten-Year Projection of Income and Expense – Because the fixed and variable
forecast of income and expense is carried out only to the stabilized year, it is
necessary to continue the projection to the eleventh year. In most cases, net
income before debt service beyond the stabilized year is projected at an assumed
inflation rate. By increasing a property's revenue and expenses at the same rate of
inflation, net income remains constant as a percentage of total revenue, and the
dollar amount escalates at the annual inflation rate. The 10-year forecast of
July-2014
viii
income and expense illustrates the proposed subject property's net income, which
is assumed to increase by 2.0% annually subsequent to the hotel's stabilized year
of operation.
The following values are assigned to the variable components for the purposes of
this valuation.
SUMMARY OF KNOWN VARIABLES
Annual Net Income
Loan-To-Value Ratio
Interest Rate
Debt Service Constant
Equity Yield
Transaction Costs
Annual Constant Required to
Amortize the Loan in Ten Years
Terminal Capitalization Rate
NI
M
i
f
Ye
b
See Ten-Year Forecast
60 %
5.00 %
0.078855
19.0 %
2.0 %
fp
Rr
0.128294
11.0 %
The following table illustrates the present worth of a $1 factor at the 19.0% equity
yield rate.
PRESENT WORTH OF $1 FACTOR AT THE EQUITY YIELD RATE
Year
Ending
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
July-2014
Present Worth of $1
Factor at 19.0%
0.840308
0.706118
0.593357
0.498602
0.418980
0.352072
0.295849
0.248604
0.208904
0.175544
ix
Using these known variables, the following intermediary calculations must be
made before applying the simultaneous valuation formula. The fraction of the loan
paid off during the projection period is calculated as follows.
P=(
0.07886 - 0.0500 ) / ( 0.12829 - 0.0500 ) = 0.368546
The annual debt service is calculated as f x M x V.
(f x M x V)=
0.07886 x 0.60 x V = (
0.04731 )V
Inserting the known variables into the hotel valuation formula produces the
following.
(
(
(
(
(
(
(
(
(
(
866,000
1,015,000
1,163,000
1,187,000
1,211,000
1,235,000
1,260,000
1,284,000
1,310,000
1,337,000
(((
1,364,000 /
((
1-
-
0.04731
0.04731
0.04731
0.04731
0.04731
0.04731
0.04731
0.04731
0.04731
0.04731
V)
V)
V)
V)
V)
V)
V)
V)
V)
V)
x
x
x
x
x
x
x
x
x
x
0.84034
0.70616
0.59342
0.49867
0.41905
0.35214
0.29592
0.24867
0.20897
0.1756
+
+
+
+
+
+
+
+
+
+
0.110 ) - ( 0.020 x ( 1,364,000 / 0.110 )) -
0.368546 ) x
0.6 x V)) x
0.175602 )= ( 1 -
0.6 )V
Like terms are combined as follows.
$7,003,512 -
0.271819V =
$7,003,512 =
V
=
V
=
Total Property Value as Indicated by
the Income Capitalization
Approach (Say)
=
July-2014
(1 - 0.60)V
0.67182V
$7,003,512 / 0.67182
$10,424,701
$10,400,000
x
2011 Canadian Hotel Sales
Date of
BC Sale
AB
Property Name
City
Feb-11
Mar-11
Mar-11
Mar-11
Mar-11
Apr-11
Apr-11
Apr-11
May-11
Jun-11
Jun-11
Jun-11
Jun-11
Jun-11
Jun-11
Jul-11
Sep-11
Oct-11
18
Traveller's Inn Victoria
Tally Ho Motor Hotel
Travelodge Nanaimo
Kamloops Towne Lodge
Super 8 Langley Aldergrove
Travelodge Kamloops
Lonsdale Quay Hotel
Sandman Hotel & Suites Squamish (Holiday Inn Express)
Traveller's Inn Downtown
Sutton Place Hotel
Delta Vancouver Airport Hotel & Marina
Comfort Inn Vancouver Airport
Best Western Tumbler Ridge
Beach Grove Motel
Ramada Inn Pitt Meadows
Days Inn Chilliwack
Oasis Hotel
Aerie Resort & Spa
Sales
Victoria
Victoria
Nanaimo
Kamloops
Langley
Kamloops
North Vancouver
Squamish
Victoria
Vancouver
Richmond
Richmond
Tumbler Ridge
Tsawwassen
Pitt Meadows
Chilliwack
Surrey
Malahat
Date of
Sale
Property Name
City
Jan-11
Feb-11
Mar-11
Mar-11
Mar-11
Apr-11
May-11
May-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Sep-11
Oct-11
Oct-11
Oct-11
Howard Johnson Express Inn Calgary
Econo Lodge Edmonton
Lloydminster Motor Inn
Courtyard Edmonton
Stonebridge Hotel Fort McMurray
Best Western of Olds
Athabasca Lodge Motel
Jasper House Bungalows
Royal Inn Spruce Grove
Sutton Place Edmonton
Travellers Inn Camrose
Holiday Inn Calgary Airport
Best Western Premier Freeport Inn & Suites
Super 8 Medicine Hat
Thriftlodge Lethbridge
Super 8 Vermillion
Calgary
Edmonton
Lloydminster
Edmonton
Fort McMurray
Olds
Athabasca
Jasper
Spruce Grove
Edmonton
Camrose
Calgary
Calgary
Medicine Hat
Lethbridge
Vermillion
Calgary
17
MB
Sales
Room
Count
48
51
78
202
41
67
70
95
81
561
414
129
102
15
78
29
40
35
2,136
Property Name
City
Price Paid
48
37
64
177
134
41
32
56
48
313
40
168
97
70
91
66
159
$3,136,000
$3,600,000
$2,100,000
$26,000,000
$27,500,000
$5,200,000
$1,860,000
$7,500,000
$4,250,000
$33,875,000
$2,030,000
$23,500,000
$15,500,000
$4,604,000
$2,300,000
$8,100,000
$23,000,000
Feb-11
Jun-11
Aug-11
Oct-11
4
Howard Johnson Express Inn Winnipeg West
Stock Exchange Hotel
Country Inn & Suites Winnipeg
Hilton Suites Winnipeg Airport
Sales
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Rm.
Count
48
14
76
160
298
Price Per Overall
Room
Cap
$2,300,000 $47,917
$4,200,000 $82,353
$6,500,000 $83,333
$15,000,000 $74,257
$3,000,000 $73,171
$5,000,000 $74,627
---Undisclosed--$5,810,000 $61,158
$6,325,000 $78,086
$163,625,000 $291,667
$55,000,000 $132,850
$12,000,000 $93,023
$7,015,000 $68,775
$1,350,000 $90,000
$9,550,000 $122,436
$1,900,000 $65,517
$5,600,000 $140,000
$3,100,000 $88,571
$311,275,000 $145,728
Rm.
Count
1,641
Date of
Sale
Price Paid
9.5%
4.0%
8.5%
9.0%
8.5%
N/A
N/A
8.4%
5.6%
4.5%
7.2%
N/A
N/A
8.4%
N/A
N/A
N/A
Price Per Overall
Room
Cap
$65,333
$97,297
$32,812
$146,893
$205,224
$126,829
$58,125
$133,929
$88,542
$108,227
$50,750
$139,881
$157,732
$65,771
$25,275
$122,727
$144,654
N/A
9.6%
N/A
7.8%
11.5%
N/A
N/A
9.0%
N/A
4.7%
16.2%
10.0%
N/A
11.3%
N/A
10.7%
N/A
$194,055,000 $118,254
Price Paid
Price Per Overall
Room
Cap
$4,500,000 $93,750
$2,200,000 $157,143
$7,300,000 $96,053
$25,000,000 $156,250
$39,000,000 $130,872
N/A
16.0%
11.6%
9.1%
(Continue Next Page)
2011 CANADIAN HOTEL TRANSACTION SURVEY – CANADIAN MONTHLY LODGING OUTLOOK – DECEMBER 2011 | PAGE 4
Date of
SK Sale
NU
ON
Property Name
City
Jul-11
Jul-11
Aug-11
Aug-11
Dec-11
5
Motel 6 Estevan
Super 8 Regina
Country Inn & Suites
Country Inn & Suites By Carlson
Wingate by Wyndham Regina Hotel
Sales
Estevan
Regina
Saskatoon
Regina
Regina
Date of
Sale
Property Name
City
May-11
May-11
2
Navigator Inn Iqaluit
Nova Inn Iqaluit (Hotel Arctic)
Sales
Iquluit
Iqaluit
Date of
Sale
Property Name
City
Jan-11
Feb-11
Mar-11
Mar-11
Mar-11
Mar-11
Mar-11
Mar-11
Apr-11
May-11
May-11
May-11
May-11
May-11
Jun-11
Jun-11
Jun-11
Jul-11
Jul-11
Aug-11
Aug-11
Aug-11
Aug-11
Aug-11
Sep-11
Sep-11
Sep-11
Sep-11
Sep-11
Oct-11
Oct-11
Oct-11
Oct-11
Oct-11
Oct-11
Oct-11
Oct-11
Oct-11
Nov-11
Dec-11
Dec-11
Dec-11
42
Hidden Valley Resort
Huntsville
Lotus Motel
Cobourg
Deerhurst Resort
Huntsville
Inn at Manitou
McKellar
Ramada Inn London
London
Lake Simcoe Motel
Barrie
Avenue Inn
Niagara Falls
River Garden Inn
Stratford
Niagara Family Inn
Niagara Falls
Benmiller Inn & Spa
Goderich
Anchorage Motel
Niagara-on-the-Lake
Parkview Motel
Guelph
Perth Manor Boutique Hotel
Perth
Delta Toronto East
Toronto
Hill Island Resort
Lansdowne
Shamrock Motel
Midland
Sunset Inn
North Bay
Knights Inn Niagara Falls Lundys Lane
Niagara Falls
Idlewyld Inn
London
Howard Johnson
Toronto
Rosseau JW Marriott Resort & Spa
Minett
Baymont Inn & Suites Niagara Falls
Niagara Falls
Best Western White House Inn
Brockville
Tulip Motel
Woodstock
Inn on Somerset
Ottawa
Indigo Inn
Cornwall
Travelodge Trenton
Trenton
Monterey Inn Resort
Ottawa
InterContinental Toronto Center
Toronto
Palace Motel
Grimsby
Super 8 Barrie
Barrie
Michael's Inn By The Falls
Niagara Falls
Marriott Courtyard Airport Corporate Centre West
Mississauga
Residence Inn by Marriott Airport Corporate Centre West Mississauga
Residence Inn by Marriott Toronto Vaughan
Vaughan
Courtyard by Marriott Hamilton
Hamilton
Best Western Plus Governor 's Inn
Kincardine
Garden City Inn & Suites
St. Catharines
The Grange Hotel
Toronto
Holiday Inn Yorkdale
Toronto
Code's Mill Inn
Perth
Elephant Lake Lodge
Haliburton
Sales
Rm.
Count
68
61
76
77
118
400
Rm.
Count
35
75
110
Rm.
Count
94
24
221
34
124
20
66
115
36
57
22
36
16
371
51
24
26
93
23
69
132
59
57
21
12
67
43
88
586
24
82
130
94
133
132
136
59
52
77
370
58
32
3,966
Price Paid
Price Per Overall
Room
Cap
$6,775,000 $99,632
$5,200,000 $85,246
$11,000,000 $144,737
$7,500,000 $97,403
$16,150,000 $136,864
$46,625,000 $116,563
Price Paid
Price Per Overall
Room
Cap
$3,800,000 $108,571
$17,000,000 $226,667
$20,800,000 $189,091
Price Paid
12.1%
11.4%
10.9%
11.3%
10.0%
N/A
N/A
Price Per Overall
Room
Cap
$2,500,000 $26,596
$1,241,000 $51,708
$26,000,000 $117,647
$1,450,000 $42,647
$3,900,000 $31,452
$1,260,000 $63,000
$1,265,000 $19,167
$6,500,000 $56,522
$1,835,000 $50,972
$1,550,000 $27,193
$4,507,000 $204,864
$2,200,000 $61,111
$1,350,000 $84,375
$21,275,000 $57,345
$1,199,000 $23,510
$1,210,000 $50,417
$1,377,000 $52,962
$2,450,000 $26,344
$1,100,000 $47,826
$12,250,000 $177,536
---Undisclosed--$1,285,000 $21,780
$2,800,000 $49,123
$1,199,900 $57,138
$1,400,000 $116,667
$1,200,000 $17,910
$3,020,000 $70,233
$4,300,000 $48,864
---Undisclosed--$1,215,000 $50,625
$7,950,000 $96,951
$6,000,000 $46,154
---Undisclosed-----Undisclosed-----Undisclosed-----Undisclosed--$5,000,000 $84,746
2,425,000 $46,635
6,650,000 $86,364
$22,850,000 $61,757
$2,900,000 $50,000
$1,080,000 $33,750
$388,443,900 $102,872
3.5%
N/A
2.5%
N/A
N/A
N/A
N/A
N/A
N/A
1.4%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
7.0%
N/A
N/A
N/A
5.4%
8.9%
N/A
N/A
Date of
QC Sale
NS
Property Name
City
Feb-11
Feb-11
Mar-11
Apr-11
Jun-11
Jun-11
Jun-11
Aug-11
Sep-11
Nov-11
10
Holiday Inn Pointe Claire Montreal Airport
Motel White House
Le Port Royal Hotel & Suites
Manoir d'Youville
Residence Inn Montreal Airport
Courtyard Montreal Airport
Hotel Val-des-Neiges
Hotel L'Urbania (Hotel du Roy)
Hotel Clarion Gatineau Ottawa
Clarendon Hotel
Sales
Pointe Claire
Beauport
Quebec
Chateauguay
Montreal
Montreal
Beaupre
Trois-Rivieres
Gatineau
Quebec City
Date of
Sale
Property Name
City
Radisson Suite Hotel Halifax
Holiday Inn Express Halifax
Sales
Halifax
Halifax
Jun-11
Oct-11
2
100
Total Sales
Rm.
Count
308
32
47
117
169
160
111
102
116
143
1,305
Rm.
Count
104
98
202
10,058
Price Paid
Price Per Overall
Room
Cap
$12,200,000 $39,610
$1,400,000 $43,750
$3,200,000 $68,085
$5,050,000 $43,162
$20,033,429 $118,541
$18,966,560 $118,541
$2,500,000 $22,523
$1,900,000 $18,627
$7,400,000 $63,793
$15,200,000 $106,294
$87,849,989 $67,318
Price Paid
N/A
N/A
N/A
N/A
8.2%
8.2%
N/A
N/A
N/A
N/A
Price Per Overall
Room
Cap
$12,324,000 $118,500
$6,500,000 $66,327
$18,824,000 $93,188
6.2%
4.3%
$1,106,872,889 $112,304
Date of
BC Sale
AB
MB
Property Name
City
Jan-12
Feb-12
Feb-12
Mar-12
Mar-12
Apr-12
May-12
Jul-12
Oct-12
Nov-12
10
Stonebridge Hotel Fort St. John
Huntingdon Hotel & Suites
401 Inn
Queen Victoria Hotel & Suites
Best Value Westward Inn
Inn at Westminster Quay
Travelodge Victoria Airport
Howard Johnson Canterbury Inn
Ramada Hotel & Suites Metrotown
Sales
Richmond
Fort Saint John
Victoria
Burnaby
Victoria
Langley
New Westminster
Sidney
Victoria
Vancouver
Date of
Sale
Property Name
City
Jan-12
Feb-12
Feb-12
Feb-12
Mar-12
Mar-12
Apr-12
Apr-12
May-12
May-12
May-12
Jun-12
Jun-12
Jun-12
Jul-12
Jul-12
Jul-12
Aug-12
Aug-12
Aug-12
Aug-12
Sep-12
Sep-12
Sep-12
Nov-12
25
Five Calgary Downtown Suites
Radisson Hotel & Suites Fort McMurray
Grande Prairie Inn
Stonebridge Grand Prairie
Banff International Hotel
Sand Brar Inn & Suites
Pyramid Lake Resort
Mountaineer Lodge
Causeway Bay Hotel
Clearwater Timberlea Residence Hotel
Best Western Innisfail Inn
Travelodge Calgary MacLeod Trail
Nova Inn Slave Lake
Sands Hotel
Super 8 Three Hills
Nova Inn Whitecourt
Grande Rockies Resort
Drumheller Inn
Days Inn & Conference Center Edmonton Airport Leduc
Travelodge Red Deer
Sawridge Inn
Travelodge Edmonton East
Super 8 Edson
Sales
Calgary
Fort McMurray
Grande Prairie
Grande Prairie
Banff
Fox Creek
Jasper
Lake Louise
Calgary
Fort McMurray
Innisfail
Calgary
Slave Lake
Edmonton
Three Hills
Whitecourt
Edmonton
Canmore
Drumheller
Edmonton
Leduc
Red Deer
Slave Lake
Edmonton
Edson
Date of
Sale
Property Name
City
Jun-12
Jun-12
Dec-12
3
Lord Selkirk Hotel & Motel
Pandora Inn
Holiday Inn Winnipeg South*
Sales
Selkirk
Winnipeg
Winnipeg
Room
Count
Price Paid
129
127
135
31
146
52
126
89
80
122
1,037
$15,000,000
$14,274,800
$5,650,000
$3,175,000
$22,000,000
$2,127,271
$17,325,000
$16,200,000
$3,800,000
$15,500,000
$115,052,071
Room
Count
Price Paid
301
134
204
126
162
93
62
78
72
66
66
254
89
53
82
76
95
29
100
160
120
135
175
90
63
2,885
$56,600,000
$25,100,000
$22,480,000
$14,162,400
$23,500,000
$11,500,000
$6,500,000
$8,000,000
$4,300,000
$30,500,000
$5,100,000
$11,000,000
$7,100,000
$3,600,000
$4,500,000
$6,500,000
$14,135,000
$2,575,000
$3,350,000
$31,000,000
$12,750,000
$2,600,000
$10,500,000
$8,200,000
$6,400,000
$331,952,400
Room
Count
Price Paid
27
8
170
205
$1,050,000
$1,075,000
$5,500,000
$7,625,000
Price Per Overall
Room
Cap
$116,279
$112,400
$41,852
$102,419
$150,685
$40,909
$137,500
$182,022
$47,500
$127,409
$110,947
5.8%
15.0%
N/A
0.0%
N/A
N/A
7.6%
N/A
N/A
N/A
Price Per Overall
Room
Cap
$188,040
$187,313
$110,196
$112,400
$145,062
$123,656
$104,839
$102,564
$59,722
$462,121
$77,273
$43,307
$79,775
$67,924
$54,878
$85,526
$148,789
$88,793
$33,500
$193,750
$106,250
$19,300
$60,000
$91,111
$101,587
$115,061
8.0%
7.3%
2.7%
15.0%
N/A
14.8%
9.3%
9.3%
N/A
11.0%
10.9%
6.7%
14.1%
N/A
5.0%
11.2%
9.6%
N/A
N/A
6.6%
9.8%
N/A
13.5%
9.6%
11.7%
Price Per Overall
Room
Cap
$38,889
$134,375
$64,706
$37,195
N/A
N/A
10.0%
Date of
SK Sale
ON
Property Name
City
Feb-12
Nov-12
2
Prospector Inn
Saskatoon Inn Hotel & Conference Center
Sales
Creighton
Saskatoon
Date of
Sale
Property Name
City
Jan-12
Jan-12
Jan-12
Feb-12
Feb-12
Feb-12
Feb-12
Feb-12
Mar-12
Mar-12
Mar-12
Apr-12
Apr-12
Apr-12
Apr-12
Apr-12
Apr-12
Apr-12
May-12
May-12
May-12
Jun-12
Jun-12
Jun-12
Jun-12
Jun-12
Jul-12
Jul-12
Jul-12
Aug-12
Aug-12
Sep-12
Sep-12
Oct-12
Oct-12
Oct-12
Oct-12
Oct-12
Oct-12
Oct-12
Nov-12
Nov-12
Nov-12
Nov-12
Nov-12
Dec-12
Dec-12
Dec-12
48
Super 8 North Bay
Orangeville Motel
Super 8 Peterborough
Hotel Quinte
Knights Inn by the Falls
Best Western Pembroke Inn & Conference Center
Devonshire Inn
Canadiana Inn
Four Points London
Travelodge North Bay
Four Seasons Toronto
Quality Inn & Suites 1000 Islands
Best Western Plus Royal Brock Hotel and Conference Centre
Guelph Royal Inn & Suites
Super 8 Motel Guelph
Howard Johnson Inn Leamington
Clarion Hotel & Suites Selby
Evenholme Estate Inn & Spa
Bradford Inn
Mohawk Inn
Comfort Inn Guelph
Travelodge Kenora
Super 8 Mount Hope
Stardust Inn Niagara Falls
Stouffville Inn
Sutton Place Toronto
Best Western Sword Motor Inn
Motel 6 London
Super 8 Motel Woodstock
Sam Jakes Inn
Super 8 Motel
Comfort Inn Brampton
Best Western Country Squire Resort
Four Points by Sheraton Kingston
Station Park An All Suite Hotel
Comfort Inn Midland
Voyager Inn
Quality Hotel & Conference Centre Oshawa
Four Points Toronto Lakeshore
Comfort Inn Windsor
Delta Kitchener
Comfort Inn Brockville
Royal Connaught Hotel
Travelodge Ottawa Downtown
Marriott Toronto Airport
Lindsay Inn
Carriage House Motor Lodge
Courtyard by Marriott Ottawa Downtown*
Sales
North Bay
Orangeville
Peterborough
Belleville
Niagara Falls
Pembroke
Wellington
Whitby
London
North Bay
Toronto
Gananoque
Guelph
Guelph
Guelph
Leamington
Toronto
Woolwich
Bradford
Campbellville
Guelph
Kenora
Mount Hope
Niagara Falls
Stouffville
Toronto
Bancroft
London
Woodstock
Merrickville
Scarborough
Brampton
Gananoque
Kingston
London
Midland
North Bay
Oshawa
Toronto
Windsor
Kitchener
Brockville
Hamilton
Ottawa
Toronto
Lindsay
Niagara Falls
Ottawa
Room
Count
Price Paid
35
250
285
$1,400,000
$37,150,000
$38,550,000
Room
Count
Price Paid
50
18
82
46
47
88
7
26
181
76
380
54
104
63
34
77
82
10
14
37
80
42
49
24
50
454
46
99
72
33
50
107
68
171
126
60
80
194
154
80
201
75
244
37
424
44
91
183
4814
Price Per Overall
Room
Cap
$40,000
$148,600
$135,263
15.0%
10.0%
Price Per Overall
Room
Cap
$2,677,000
$53,540
$1,605,000
$89,167
$5,760,000
$70,244
$2,355,000
$51,196
$1,350,000
$28,723
$6,250,000
$71,023
$1,292,500
$184,643
$1,775,000
$68,269
$19,000,000
$104,972
$2,300,000
$30,263
$142,500,000
$375,000
$3,350,000
$62,037
$7,525,000
$72,400
$2,100,000
$33,333
$3,040,000
$89,400
$3,885,000
$50,455
$16,125,000
$196,646
$1,746,500
$174,650
$1,105,000
$78,929
$3,200,000
$86,486
$3,600,000
$45,000
$2,270,000
$54,048
$3,700,000
$75,510
$1,275,000
$53,100
$1,541,084
$30,822
$57,000,000
$125,551
$2,600,000
$56,522
$4,000,000
$40,400
$3,500,000
$48,611
$1,790,000
$54,242
$2,380,000
$47,600
$3,300,000
$30,800
$2,800,000
$41,200
$14,500,000
$84,800
$12,650,000
$100,400
$2,600,000
$43,333
$3,500,000
$43,750
$6,400,000
$32,990
$25,700,001
$166,900
$3,400,000
$42,500
---Undisclosed--$4,720,000
$62,900
$6,400,000
$26,200
$3,300,000
$89,189
$30,600,000
$72,170
$3,180,000
$72,300
$2,400,000
$26,400
$13,250,000
$144,809
$457,797,085
$95,097
N/A
N/A
8.5%
N/A
N/A
N/A
N/A
N/A
7.5%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
8.5%
N/A
4.7%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.3%
N/A
4.0%
8.0%
N/A
N/A
N/A
N/A
5.0%
9.4%
N/A
N/A
N/A
N/A
N/A
10.0%
Date of
QC Sale
NB
NS
Property Name
City
Feb-12
Apr-12
May-12
Jul-12
Aug-12
Sep-12
Sep-12
7
Auberge Chomedey Inn
Grand Plaza Montreal Centre-Ville
Hotel Le Cofortel
Residence Inn by Marriott Downtown Montreal
Holiday Inn Express Saint Jean Sur Richelieu
Opus Montreal
Hotel de la Montagne
Sales
Laval
Montreal
L'Ancienne-Lorette
Montreal
Saint Jean Sure Richelieu
Montreal
Montreal
Date of
Sale
Property Name
City
Mar-12
1
Algonquin Hotel & Resort St Andrews
Sale
St Andrews
Date of
Sale
Property Name
City
Nov-12
1
97
Holiday Inn Express Hotel Stellarton New Glasgow
Sale
Total Hotel Sales
Stellarton
Room
Count
Price Paid
Price Per Overall
Room
Cap
41
371
137
190
98
138
142
1117
$1,950,000
$26,850,000
$5,160,000
$24,000,000
$7,200,000
$10,000,000
$39,000,000
$114,160,000
Room
Count
Price Paid
242
N/A
Room
Count
Price Paid
125
$7,899,999
$63,200
10710 $1,073,036,555
$104,307
$47,600
$72,372
$37,664
$126,316
$73,469
$72,500
$274,648
$102,202
N/A
N/A
N/A
9.7%
10.0%
N/A
N/A
Price Per Overall
Room
Cap
N/A
N/A
Price Per Overall
Room
Cap
12.0%
Note: * Purchase price represents a 50% interest
BC
AB
Date of
Sale
Property Name
City
Jan-13
Jan-13
Feb-13
Feb-13
Mar-13
Mar-13
Mar-13
Apr-13
May-13
May-13
May-13
May-13
May-13
Jun-13
Jul-13
Jul-13
Aug-13
Sep-13
Sep-13
Sep-13
Sep-13
Sep-13
Sep-13
Nov-13
24
Canadas Best Value Inn Langley
Chalet Motel
Best Western Plus Abercorn Inn Richmond
Coast Vancouver Airport
Parkside Victoria Resort & Spa
Aleeda Motel
Harrison Hot Springs Hotel
Executive Inn Express Richmond
Super 8 Vernon
Econo Lodge Inn and Suites Kamloops
Alpine House Motel
Quality Inn Langley
Cedars Motel
Chieftain Hotel
Super 8 Abbotsford
Brentwood Bay Lodge and Spa Victoria
Corporate Inn
Comfort Inn Chilliwack
Ramada Vancouver Exhibition Park
Westin Bayshore Vancouver
Northern Motor Inn
Sales
Langley
Langley
Kitimat
Richmond
Vancouver
Victoria
Prince Rupert
Harrison Hot Springs
Richmond
Langley
Vernon
Kamloops
Terrace
Langley
Richmond
Terrace
Squamish
Abbotsford
Victoria
New Westminister
Chilliwack
Vancouver
Vancouver
Terrace
Date of
Sale
Property Name
City
Jan-13
Jan-13
Jan-13
Jan-13
Feb-13
Feb-13
Feb-13
Feb-13
Mar-13
Mar-13
Apr-13
Apr-13
Jun-13
Jun-13
Jul-13
Jul-13
Aug-13
Aug-13
Aug-13
Aug-13
Aug-13
Aug-13
Aug-13
Aug-13
Sep-13
Sep-13
Sep-13
Oct-13
Nov-13
Dec-13
30
Super 8 Motel
Hotel Elan Calgary
Super 8 Fort Saskatchewan
Super 8 Innisfail
Travelodge Edmonton West
Rockyview Hotel
Chinook Inn
Roadrunner Motel
Paradise Inn & Conference Centre Grande Prairie
Travelodge Brooks
Chateau Lacombe Hotel
Grassland Motel
Travelodge Medicine Hat
Clarion Hotel and Conference Centre Calgary
Advantage Motel
Western Valley Inn
Four Points by Sheraton Edmonton International Airport
Quality Inn North Hill Red Deer
Horizon Motel
Howard Johnson Hotel Edmonton
Royal Western Motel
Ritz Cafe and Motor Inn
Quality Inn & Convention Centre Medicine Hat
Westin Calgary
Westin Edmonton
Grand Hotel Edmonton
Acclaim Hotel Calgary Airport
Microtel Inn and Suites by Wyndham Blackfalds/Red Deer
Sales
Red Deer
Calgary
Fort Saskatchewan
Innisfail
Edmonton
Cochrane
Rocky Mountain House
Edmonton
Grande Prairie
Brooks
Edmonton
Grassland
Sherwood Park
Medicine Hat
Calgary
Edmonton
Valleyview
Nisku
Red Deer
Saint Albert
Edmonton
Edmonton
Fort Saskatchewan
Whitecourt
Medicine Hat
Calgary
Edmonton
Edmonton
Calgary
Blackfalds
Room
Count
Price Paid
46
46
48
98
130
126
31
337
81
80
62
45
24
50
129
22
26
99
33
15
83
58
511
32
2,212
$2,400,000
$2,093,000
$3,500,000
$14,250,000
$15,000,000
$23,000,000
$625,000
$32,300,000
$4,174,500
$5,700,000
$4,350,000
$3,200,000
$385,000
$2,581,000
$16,000,000
$1,100,000
$2,100,000
$12,050,000
$13,998,000
$2,850,000
$4,500,000
$7,260,000
$150,800,000
$4,000,000
$328,216,500
Room
Count
Price Paid
72
62
87
50
220
15
19
46
102
61
307
20
90
128
185
50
50
112
114
38
59
38
100
62
61
525
416
76
225
63
3,453
$1,650,000
$11,422,000
$8,721,500
$4,900,000
$13,000,000
$1,660,000
$990,000
$3,720,000
$5,500,000
$2,800,000
$27,500,000
$1,050,000
$15,150,000
$3,570,000
$18,100,000
$2,500,000
$6,750,000
$17,725,000
$15,750,000
$3,450,000
$6,201,561
$3,700,000
$11,000,000
$5,500,000
$4,100,000
$192,100,000
$86,200,000
$5,200,000
$42,000,000
$8,325,000
$530,235,061
Price Per Overall
Room
Cap
$52,174
$45,500
$72,916
$145,208
$115,384
$182,539
$20,161
$95,845
$51,500
$71,300
$70,161
$71,111
$16,042
$51,600
$124,031
$50,000
$80,800
$121,717
$424,182
$190,000
$54,200
$125,000
$295,000
$125,000
$148,380
N/A
N/A
12.6%
4.8%
2.7%
N/A
8.0%
8.9%
N/A
N/A
9.1%
N/A
10.9%
N/A
N/A
10.3%
N/A
N/A
5.6%
N/A
10.0%
N/A
4.5%
14.8%
Price Per Overall
Room
Cap
$22,900
$184,200
$100,247
$98,000
$59,091
$110,666
$52,105
$80,870
$53,922
$45,900
$89,577
$52,500
$168,333
$27,900
$97,838
$50,000
$135,000
$158,259
$138,158
$90,789
$105,111
$97,368
$110,000
$88,710
$67,200
$366,000
$207,211
$68,421
$186,667
$132,143
$153,558
N/A
N/A
N/A
12.7%
4.0%
N/A
14.7%
9.5%
3.7%
N/A
N/A
N/A
9.0%
7.9%
7.4%
N/A
N/A
N/A
8.7%
N/A
5.0%
N/A
9.0%
13.3%
N/A
8.2%
7.9%
N/A
N/A
N/A
2013 CANADIAN HOTEL TRANSACTION SURVEY – | PAGE 5
MB
ON
Date of
Sale
Property Name
City
Jan-13
Jan-13
Jul-13
Nov-13
4
St. Regis Hotel
Holiday Inn Winnipeg South*
Carlton Inn Winnipeg
Super 8 Morden
Sales
Winnipeg
Winnipeg
Winnipeg
Morden
Date of
Sale
Property Name
City
Jan-13
Jan-13
Jan-13
Jan-13
Feb-13
Feb-13
Mar-13
Mar-13
Apr-13
Apr-13
May-13
May-13
May-13
May-13
May-13
May-13
May-13
May-13
May-13
Jun-13
Jun-13
Jun-13
Jun-13
Jun-13
Jun-13
Jun-13
Jun-13
Jun-13
Jun-13
Jun-13
Jul-13
Jul-13
Jul-13
Aug-13
Aug-13
Aug-13
Aug-13
Sep-13
Sep-13
Sep-13
Sep-13
Sep-13
Sep-13
Oct-13
Metropolitan Hotel
Quality Hotel Burlington
Hampton Inn Napanee
Residence Inn by Marriott London
Hilton Toronto
Holiday Inn Express Brampton
Econo Lodge London Ontario
Microtel Woodstock Ontario
Econo Lodge Fort Erie
Super 8 Huntsville
Courtyard by Marriott Toronto Downtown
Hilton Windsor
Guelph Royal Inn & Suites
Diamond Motor Inn
Harbour Inn & Resort Lagoon City
Comfort Inn Midland
Knights Inn Park Villa Motel
Hilton Toronto Airport
Holiday Inn Hotel & Suites Toronto Markham
Quality Hotel & Suites Airport East
Travelodge Oshawa
Super 8 Sudbury
Courtyard by Marriott Meadowvale
Courtyard by Marriott Markham
Residence Inn by Marriott Meadowvale
Residence Inn by Marriott Markham
Courtyard by Marriott Toronto Vaughan
Days Inn
Knights Inn Sudbury
Fairfield Inn & Suites by Marriott Toronto Airport
Comfort Inn By Journeys End
Motel 6 Peterborough
Touchstone On Lake Muskoka
Omni King Edward Hotel Toronto
Empress Inn Hotel
Holiday Inn Express Clarington Bowmanville
SW Hotel Toronto Airport Mississauga
Red Carpet Inn and Suites Sudbury
Comfort Inn London
Walper Hotel
Comfort Inn Burlington
Westin Ottawa
Westin Harbour Castle Toronto
Holiday Inn Express Ottawa West Nepean
Toronto
Burlington
Napanee
London
Toronto
Brampton
London
Woodstock
Fort Erie
Huntsville
Toronto
Windsor
Guelph
Diamond Motor Inn
Brechin
Midland
Midland
Mississauga
Markham
Toronto
Oshawa
Sudbury
Mississauga
Markham
Mississauga
Markham
Vaughan
Guelph
Sudbury
Mississauga
Kingston
Peterborough
Bracebridge
Toronto
Niagara Falls
Bowmanville
Mississauga
Lively
London
Kitchener
Burlington
Ottawa
Toronto
Ottawa
Room
Count
Price Paid
106
170
108
50
434
$5,000,000
$5,500,000
$2,166,666
$3,572,400
$16,239,066
Room
Count
Price Paid
430
110
58
116
601
84
87
74
70
37
575
512
65
22
43
60
41
419
299
197
120
85
144
144
100
100
144
87
35
170
57
85
N/A
N/A
81
95
224
37
79
82
99
496
977
115
$39,700,000
$9,750,000
$6,500,000
$6,000,000
$140,000,000
$8,050,000
$2,800,000
$3,347,000
$1,850,000
$1,440,000
$76,250,000
$10,250,000
$3,500,000
$1,025,000
$1,400,000
$3,000,000
$1,670,000
$25,000,000
$11,000,000
$9,750,000
$8,150,000
$4,050,000
$14,650,000
$14,700,000
$13,250,000
$10,700,000
$17,250,000
$3,400,000
$1,000,000
$16,000,000
$2,300,000
$4,350,000
N/A
N/A
$1,285,000
$8,377,348
$13,800,000
$1,607,500
$2,700,000
$4,600,000
$4,500,000
$139,000,000
$196,900,000
$19,500,000
Price Per Overall
Room
Cap
$29,412
$64,706
$20,061
$71,448
$37,417
N/A
10.0%
N/A
N/A
Price Per Overall
Room
Cap
$92,326
$88,636
$112,100
$51,724
$232,945
$95,833
$32,183
$45,200
$26,400
$38,900
$132,608
$20,000
$53,800
$46,600
$32,600
$50,000
$40,700
$59,666
$36,789
$49,500
$67,900
$47,600
$101,700
$102,100
$132,500
$107,000
$119,800
$39,100
$28,600
$94,118
$40,400
$51,200
N/A
N/A
$15,864
$88,183
$61,607
$43,500
$34,000
$56,100
$45,500
$280,000
$202,000
$169,565
N/A
N/A
N/A
10.0%
7.6%
N/A
N/A
N/A
N/A
N/A
7.7%
N/A
N/A
N/A
N/A
N/A
N/A
8.4%
4.5%
N/A
N/A
N/A
7.7%
8.2%
7.3%
7.2%
7.3%
N/A
N/A
6.1%
N/A
N/A
N/A
N/A
N/A
8.4%
N/A
N/A
8.9%
N/A
7.8%
8.0%
7.8%
8.2%
ON
QC
NB
Date of
Sale
Property Name (cont'd)
City
Oct-13
Oct-13
Oct-13
Nov-13
Nov-13
Nov-13
Nov-13
Nov-13
Dec-13
Dec-13
Dec-13
Dec-13
56
Delawana Inn
A1 Motel
Crystal Inn on the Parkway
Days Inn Barrie
Comfort Inn Meadowvale
Howard Johnson Inn Sarnia
Fairmont Chateau Laurier
Muskoka Riverside Inn
Oasis Motel Niagara Falls
Travelodge North Bay
Universal Inn and Suites
Holiday Inn Express North York
Sales
Honey Harbour
Niagara Falls
Niagara Falls
Barrie
Mississauga
Sarnia
Ottawa
Bracebridge
Niagara Falls
North Bay
Niagara Falls
North York
Date of
Sale
Property Name
City
Feb-13
Feb-13
May-13
Jul-13
Sep-13
Sep-13
Nov-13
Dec-13
Dec-13
9
Rustik Motel
Comfort Inn & Suites Shawinigan
Motel Aubin
Delta Centre Ville
Hotel Gouverneur Trios Rivieres
Motel Le Pavillon
Hôtel Le Voyageur de Québec
Quality Hotel Montreal Downtown
Motel Dufferin
Sales
Châteauguay
Shawinigan
Montreal
Montreal
Trois Rivieres
Saint Basile le Grand
Sainte-Anne Québec
Montreal
Qubec City
Date of
Sale
Property Name
City
Lakeview Inn & Suites Fredericton
Sale
Fredericton
Property Name
City
Cambridge Suites Hotel Halifax
Cambridge Suites Hotel
Prince George Hotel
Sales
Sale
Halifax
Sydney
Halifax
Property Name
City
Mar-13
1
Battery Hotel & Suites
Sale
Saint John's
Date of
Sale
Property Name
City
Apr-13
1
Edgewater Hotel
Sale
Whitehorse
Date of
Sale
Property Name
City
Nova Court Yellowknife
Sale
Total Hotel Sales
Yellowknife
Dec-13
1
NS
Date of
Sale
Mar-13
Mar-13
Mar-13
3
1
Date of
Sale
NFL
YK
NWT
Oct-13
1
130
Room
Count
Price Paid
Price Per Overall
Room
Cap
148
$3,100,000
29
$920,000
38
$975,000
78
$5,600,000
115
$5,125,000
50
$1,485,000
429
$120,000,000
54
$2,050,000
28
$765,000
76
$2,603,750
80
$4,450,000
163
$7,500,000
8,744 $1,018,925,598
$20,900
$31,724
$25,658
$71,795
$44,600
$29,700
$279,720
$38,000
$27,321
$34,300
$55,625
$46,012
$116,529
Room
Count
Price Paid
Price Per Overall
Room
Cap
22
71
20
711
128
38
64
140
55
1,249
$1,725,000
$3,550,000
$1,700,000
$51,250,000
$7,899,000
$2,180,000
$3,816,750
$12,300,000
$1,200,000
$85,620,750
Room
Count
Price Paid
97
$3,400,000
Room
Count
Price Paid
200
145
203
548
$35,000,000
$13,950,000
$35,000,000
$83,950,000
Room
Count
Price Paid
127
$9,500,000
Room
Count
Price Paid
32
$1,600,000
Room
Count
Price Paid
106
$21,680,000
$204,528
17,002 $2,099,366,975
$123,478
$78,400
$50,000
$85,000
$72,081
$61,700
$57,368
$59,600
$87,900
$21,800
$68,551
N/A
N/A
N/A
N/A
N/A
N/A
6.4%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Price Per Overall
Room
Cap
$35,052
N/A
Price Per Overall
Room
Cap
$175,000
$96,207
$171,569
$153,193
6.7%
6.6%
6.9%
Price Per Overall
Room
Cap
$74,803
N/A
Price Per Overall
Room
Cap
$50,000
N/A
Price Per Overall
Room
Cap
7.7%
Note: *50% Purchase of the property, price per room is equal to the purchase of the 100% interest.
Eric Wright
EMPLOYMENT
2011 to present
HVS
Senior Associate
Vancouver, BC
2010-2011
ASSOCIATED FIRE AND SAFETY
Business Development
Vancouver, BC
2009-2010
HOTEL RAFAYEL
Front Office Duty Manager
London, United Kingdom
Feb 2008 – Aug 2008
FAIRMONT EMPRESS
Front Office
Victoria, BC
Feb 2007 – Aug 2007
IMPERIAL SAMUI HOTEL
Management Training
Koh Samui, Thailand
PROFESSIONAL
AFFILIATIONS
Appraisal Institute of Canada (Candidate)
Real Estate Council of Alberta (RECA)
EDUCATION
Northwood University – DeVos School of Business (École Hôtelière de Montreux Campus)
Montreux, Switzerland
Bachelor of Business Administration
Swiss Hotel Management School
Caux sur Montreux, Switzerland
Swiss Higher Diploma – Hospitality Management
ARTICLES AND
PUBLICATIONS
“Northern Canadian Hotel Markets,” Canadian Lodging Outlook, February 2012
“Canadian Hotel Pipeline,” Canadian Lodging Outlook, August 2011
“2010 Canadian Hotel Transaction Survey,” Canadian Loding Outlook, December 2010
HVS, Vancouver, BC
Qualifications of Eric Wright
1
EXAMPLES OF
CORPORATE
AND INSTITUTIONAL
CLIENTS SERVED
HVS, Vancouver, BC
Airline Hotels & Resorts
Argus Properties
AUM Hotel Group
Business Development Bank of Canada
Century Group
Chin Hong
Choi & Sons Enterprises
CMLS Financial
Coast Hotels & Resorts
County of Thorhild
Days Hospitality
Delta Hotels and Resorts
Elvin Ferster
Encore Hospitality
Fairmark Investments
Frankish Management
GE
Indy Atwal
Ivanhoe Cambridge
Jas Chhina
Jean Bourdua
John Day Developments
Marquee Hotels
Mayfair Hotels & Resorts
National Hospitality Group
Nova Hotels
O’Neill Hotels & Resorts
Oxford Properties Group
Pacifican Properties
Pinnacle International
Pomeroy Group
Qiji Investments
Remington Development Corporation
Salco Management
Shelter Canadian Properties
SilverBirch Hotels & Resorts
Superior Lodging Corporation
Terracap Group
Tri-City Contracting
VJ Management
Wells Fargo
Westbank Projects
Yuanheng Holdings
Zul Nathoo
2
EXAMPLES OF HOTELS
APPRAISED OR
EVALUATED
Alberta
Proposed Candlewood Suite Airport, Calgary
Redwood Inn & Suites, Clairmont
Chateau Nova, Edmonton
Coast Hotel, Edmonton
Crowne Plaza Chateau Lacombe, Edmonton
Hilton Garden Inn West, Edmonton
Holiday Inn Express South, Edmonton
Proposed Hyatt Place, Edmonton
Proposed Fairfield, Edmonton
Proposed Limited-Service, Edmonton
Proposed Marriott, Edmonton
Proposed Staybridge, Edmonton
Radisson South, Edmonton
Sutton Place, Edmonton
Travelodge West, Edmonton
Westin, Edmonton
Nova, Edson
Proposed Holiday Inn Express, Fort Saskatchewan
Grande Cache Hotel, Grande Cache
Stonebridge Inn, Grande Prairie
BW Wayside Inn & Suites, Lloydminster
Proposed Microtel, Lloydminster
Proposed Super 8, Lloydminster
Proposed Pomeroy, Olds
Proposed Hotel, Thorhild
Proposed Microtel, Whitecourt
Best Western Sands, Vancouver
Delta Airport and Marina, Vancouver
Ramada Downtown, Vancouver
Renaissance Harbourside, Vancouver
Shangri-La, Vancouver
Westin Grand, Vancouver
Proposed Pomeroy, Vernon
Best Western Carlton Plaza, Victoria
Delta Ocean Pointe, Victoria
Fairmont Empress, Victoria
Holiday Inn, Westbank
Coast Blackcomb Suites, Whistler
Manitoba
Best Western Pembina Inn & Suites, Winnipeg
MainStay Suites, Winnipeg
Northwest Territories
Chateau Nova, Yellowknife, NT
Saskatchewan
Suburban Expansion, Estevan
Proposed Microtel, Lloydminster
USA
Fairmont Olympic, Seattle
British Columbia
Proposed Hampton Inn & Suites, Abbotsford
Comfort Inn, Chilliwack
Ramada, Coquitlam
Days Inn, Dawson Creek
George Dawson Inn, Dawson Creek
Holiday Inn Express, Dawson Creek
Proposed Holiday Inn Express, Fort St. John
Proposed Microtel, Fort St. John
Harrison Hot Springs Resort & Spa
Hotel Five540Forty, Kamloops
Best Western Plus, Kelowna
Holiday Inn West, Kelowna
Proposed Hampton Inn, Kelowna
Holiday Inn Express Riverport, Richmond
Proposed Hotel, Richmond
Proposed Alt Hotel, Richmond
Ramada Airport, Richmond
Proposed Hotel, Salmon Arm
Holiday Inn Cloverdale, Surrey
Proposed Coast Hotel, Tsawwassen
HVS, Vancouver, BC
3
Carrie Russell, AACI, MAI, RIBC
EMPLOYMENT
1997 to present
HVS
Managing Director
Vancouver, BC
1996
ASHLER CONSULTING
Vancouver, BC
1995-1996
SWANS HOTEL
Victoria, BC
1994
VERNON GOLF AND COUNTRY CLUB
Vernon, BC
PROFESSIONAL
AFFILIATIONS
Appraisal Institute of Canada (AACI)
Real Estate Institute of BC (RIBC)
Real Estate Council of Alberta (RECA)
Appraisal Institute of United States (MAI)
EDUCATION
University of Victoria, Victoria, BC
Faculty of Business
Bachelor of Commerce, specializing in Tourism Management
University of British Columbia, Vancouver, BC
Diploma – Urban Land Economics Programme
HVS, Vancouver, British Columbia
Qualifications of Carrie Russell, AACI, MAI, RIBC
1
ARTICLES AND
PUBLICATIONS
“Hotel Development Trends in Alberta” Alberta Hospitality, Winter 2013
“2012 Canadian Hotel Transaction Survey,” Canadian Lodging Outlook, December 2012
“Hotel Financing Parameters in Canada,” Canadian Lodging Outlook, November 2012
“Back to Peak? A Look at Canadian Hotel Operating Performance: 2008-2011” Colliers
International INNvestment Canada, Q1 2012
“State of the Hospitality Industry” Western/Eastern Hotelier Magazine, October 2011
“A Look at the Canadian Lodging Industry in 2011 and Ahead to 2012,” Canadian Lodging
Outlook, October 2011
“2009 Canadian Hotel Transaction Survey,” Canadian Lodging Outlook, November 2009
“Who will be the Winners in this Downturn?” Canadian Lodging Outlook, March 2009
“2008 Canadian Hotel Transaction Survey,” Canadian Lodging Outlook, November 2008
“How Does Debt Financing Impact the Value of a Hotel?” Canadian Lodging Outlook, June
2008
“A Crash Course in Cap Rates,” Canadian Lodging Outlook, January 2005
“Have Hotel Values in Canada Declined Since September 11? You Bet They Have” Canadian
Lodging Outlook, August 2001
“Does Supply Generate Demand?” Canadian Lodging Outlook, February 2001
“Should You Build a Spa in Your Hotel?” Canadian Lodging Outlook, November 1999
“Winnipeg Downtown Hotel Market,” Canadian Lodging Outlook, July 1999
“Downtown Toronto Hotel Market,” Canadian Lodging Outlook, January 1999
“Franchising – Ready or Not?” InnFocus, Spring 1998
“Another Blockbuster Year For Canadian Hotel Sales,” InnFocus, Winter 1998
2
SPEAKING AND LECTURE
APPEARANCES
Canadian Hotel Investment Conference
Western Canadian Hotel Investment Conference
America Lodging Investment Summit (ALIS)
Appraisal Institute of BC Provincial Conference
Vancouver AM Tourism Association
Hospitality Financial and Technology Professionals (HFTP) Calgary Chapter
BC Assessment Hotel Industry Round Table
Travelodge Canada National Owners Conference
Ramada Regional Owners Conference
University of Calgary
University of Victoria
3
EXAMPLES OF
CORPORATE
AND INSTITUTIONAL
CLIENTS SERVED
1339850 Alberta Ltd. (Alim Jessa)
404980 Alberta Ltd. (Karima Suleman)
Aareal Bank
A-1 Hospitality
AHG Thompson
Albert Street Project
Allied Holdings
Amacon
Aquilini Group
Archon Financial
Argus Properties
Ariel Development
AVS Windows
B.A.C. Capital Corp.
Babson Capital Management
Balboa Hotels
Bank of America
Bass Hotels and Resorts
BC Housing Management Commission
Bear Stearns
Best Western International
Bhanji Brothers Investment
Bill Sidhu
Borelli Walsh
Bosa Properties
Brentwood Bay Lodge Ltd.
Bridge Road Developments
Business Development Bank of Canada
Builders Bank (Chicago)
C & H Developments
Choi & Sons Enterprises
C.S. First Boston
Cadim
Calgary Exhibition and Stampede
Calgary Tourist Development
Canad Inns
Canadian Western Bank
CanAlta Real Estate Services
Capital Co. of America
CapStar Hotel Company
Cellcom Wireless
Centron Group
Century Group
Century West Developments
Charan Rai
Chase Manhattan Bank
Chin Hong
Choi & Han Investment
CIGNA Investments Management
CitiGroup Private Bank
City of Calgary
City of Penticton
City of Port Townsend, WA
City of Vancouver
Clique Hotels & Resorts
CMLS Financial
Coast Hotels & Resorts
Command Developments
Concert Properties
Continental Wingate Capital
Coronado Properties
County of Thorhild
Credit Suisse First Boston
Crystal Square Development Corp.
Dawson Creek General Partnership
Days Hospitality
Delta Hotels & Resorts
Delta Land Developments
Delta Whistler Village Suites Strata Council
Desert Inn Osoyoos
Devonian Properties
Diamond Trust
Diversified Financial
Donaldson, Lefkin & Jenrette
Eagle River Hospitality
Eastdil Secured
Ed Bhanji
Eddie Teranishi
Encore Hospitality
Estevan Investments
Exchange District Management
Fairmark Investments
4
EXAMPLES OF
CORPORATE
AND INSTITUTIONAL
CLIENTS SERVED (CONT)
Fairmont Hotels and Resorts
Faskin Martineau
Finova Capital Corporation
Finwest Holdings
First Calgary Savings
Focus Hotels
Frankish Management
Gateway Travel Centre
GE Capital Corporation
GE Real Estate Business Property
Genesis Hospitality
Germain Group
GMAC Commercial Mortgage Group
Golden Properties
G. T. Soomal
Guildford 401 Motel
GWL Realty Advisors
Hardy Bains
Highgate Holdings
Holloway Lodging REIT
Hollypark Organization
Hotel of the Rockies
Inspire Group Development Corporation
Intrawest
Ivanhoé Cambridge
IXIS Real Estate Capital
Jassi Holdings
Jean Bourdua
John Beveridge
John Varga
Johnson Brothers Hospitality
Jordan Hotel Corporation
Kechika Developments
Kent MacPherson Appraisals
Kileel Developments
Kimpton Hotel and Restaurant Group
KLIO Real Estate Systems
Kooner Construction
L-7 Inc.
Lake Tahoe Development Company
Lakeview Hotel REIT
Lakeview Hotels & Resorts
Larco Enterprises
LaSalle Investment Management
Legacy Hotels REIT
Lehman Brothers
Lickman Travel Centre
Liquor Plus
Manitoba Lotteries Corporation
Marquee Hotels
Martie Murphy
Mayfair Hotels & Resorts
Mayfair Properties
Meridian Resource Accommodations
Merrill Lynch & Company
Meyers Norris Penny
Micro-Tel Inn and Suites
Midwest Developments
Mission Ventures
Mitchell Group Investments
Moe Sihota
Montrose Mortgage
Morguard Investments
Mutsumi Enterprises Canada
Nanjico
National Hospitality Group
Nations Bank
Naushad Jinah
New Urban Consulting
Nitze Stagen
Nor-Sham Group
Nova Builders
Ocwen Capital Corporation
ORIX Real Estate Corporation
Owens Hospitality Group
Oxford Properties Group
Pacifica Companies
Pacifican Properties
Pacrim Hospitality Services
PAN
Paragon Gaming
Pavi Khunkhun
Peace Enterprises
Peterson Investment Group
PHI Hotel Group
Picadilly Development
Pinnacle International
Pomeroy Group
5
EXAMPLES OF
CORPORATE
AND INSTITUTIONAL
CLIENTS SERVED (CONT)
PPM Finance
Prestige Hospitality
Proprietary Industries
Radisson Plaza Saskatchewan
Ramada Coquitlam
Randhawa Hotels
Remai Group
Remington Development Corporation
Retirement Concepts
Ron Mundi
Royal Bank of Canada
Royal Oak Homes
Royop Hospitality
Salomon Brothers Realty Corp.
Santo Properties
Scott Cameron
Semiahmoo Company
Servus Credit Union
Shelter Canadian Properties
Shinsei Bank
Shirvam Developments
SilverBirch Hotels and Resorts
Silver Hotel Holdings
SITQ
Souris Valley Lodging
Southpeg Hospitality Group
Starwood Asset Management
Starwood Capital Group
Starwood Financial Trust
State Bank of India
Steinbock Development Corporation
Stone Creek Properties
Summerland Motel
Sunshine Inn Estates
Superior Lodging Group
TC Enterprises
Temple REIT
Teranishi and Associates
TerraCap Group
Terrace Economic Development
The Hollypark Organization
Town of Devon
Tri City Contracting
Trilogy Development Corporation
Triple One Properties
Vacations West
Valley First Credit Union
Vancouver Hotel Association
Washington Mutual Bank
Wells Fargo
West Canadian Development
West LB
Westbank Holdings
Westmark Hotels
Westmont Hospitality
Widewaters Group
Windermere Commercial Lands
Zul Nathoo
6
EXAMPLES OF HOTELS
APPRAISED OR
EVALUATED
Alberta – Existing Hotels
Best Western, Athabasca
Douglas Fir Resort, Banff
Tunnel Mountain Resort, Banff
Acclaim Hotel, Calgary
Acclaim Hotel Airport, Calgary
Best Western Calgary Suites, Calgary
Best Western Village Park, Calgary
Converted Aloft Hotel, Calgary
Delta Bow Valley, Calgary
Fairmont Palliser, Calgary
Four Points by Sheraton, Calgary
Hampton Inn & Suites, Calgary
Hampton Inn & Suites Airport, Calgary
Hilton Garden Inn, Calgary
Hyatt Regency, Calgary
Holiday Inn, Calgary
International Hotel Suites, Calgary
Radisson, Calgary
Ramada Hotel, Calgary
Stampeder Inn, Calgary
Westin, Calgary
Doubletree Conversion, Canmore
Sheraton Four Points, Canmore
Lakeview Inn & Suites, Drayton Valley
Service Plus, Drayton Valley
Super 8, Drayton Valley
Best Western, Edmonton
Chateau Nova, Edmonton
Coast Hotel, Edmonton
Coast Terrace Inn, Edmonton
Delta South, Edmonton
Hilton Garden Inn West, Edmonton
Holiday Inn Convention Ctr, Edmonton
Holiday Inn Express, Edmonton
Holiday Inn West, Edmonton
Hotel & Convention Centre, Edmonton
Quality Inn Chateau, Edmonton
Sutton Place, Edmonton
Westin, Edmonton
Lakeview Inn & Suites, Edson East
Nova Hotel & Court, Edson
Advantage West Inn & Suites, Fort McMurray
Best Western Nomad Inn, Fort McMurray
Clearwater Suite Hotel, Fort McMurray
Franklin Suites Hotel, Fort McMurray
Merit Hotel, Fort McMurray
Merit Inn and Suites, Fort McMurray
Nomad Hotel, Fort McMurray
Nomad Inn and Suites, Fort McMurray
Platinum Hotel, Fort McMurray
Radisson Hotel, Fort McMurray
Super 8, Fort McMurray
Vantage Inn & Suites, Fort McMurray
Best Western Fort Inn, Ft. Saskatchewan
Lakeview Inn & Suites, Ft. Saskatchewan
Lakeview Inn, Fox Creek
Grande Cache Hotel, Grande Cache
Best Western, Grande Prairie
Holiday Inn, Grande Prairie
Pomeroy Inn and Suites, Grande Prairie
Stonebridge Inn, Grande Prairie
Super 8, High Level
Pomeroy Inn and Suites, High Prairie
Days Inn, Hinton
Nova Inn, Hinton
Nova Lodge, Hinton
BW Kananaskis Inn, Kananaskis
Hilton Garden Inn, Leduc
Coast Hotel, Lethbridge
Holiday Inn Express, Lethbridge
Lethbridge Lodge Hotel, Lethbridge
BW Wayside Inn & Suites, Lloydminster
Lakeview Inn & Suites, Okotoks
Nova Hotel, Peace River
Best Western, Red Deer
Capri Hotel, Red Deer
Comfort Inn & Suites, Red Deer
Home2, Red Deer
Sandman Hotel, Red Deer
Coast Edmonton East, Sherwood Park
Holiday Inn Express, Sherwood Park
Best Western, Slave Lake
Northwest Inn, Slave Lake
Super 8, Three Hills
Lakeview Inn & Suites, Whitecourt
Nova Inn, Whitecourt
Super 8, Whitecourt
7
EXAMPLES OF HOTELS
APPRAISED OR
EVALUATED (CONT)
Alberta – Proposed Hotels
AmeriHost, Airdrie
Microtel, Blackfalds
Limited -Service Hotel, Bonnyville
Best Western, Brooks
Super 8, Brooks
All-Suite Downtown, Calgary
Best Western Inn & Suites, Calgary
Boutique Hotel, Calgary
Calgary Stampede Hotel, Calgary
Candlewood Suites Airport, Calgary
Clique Hotel, Calgary
Courtyard by Marriott, Calgary
Delta, Calgary
Delta Airport, Calgary
Element Airport, Calgary
Extended-Stay Hotel, Calgary
Focused-Service Hotel, Calgary
Four Points, Calgary
Four Points Airport, Calgary
Germain Hotel, Calgary
Hampton Airport, Calgary
Hampton & Homewood, Calgary
Hilton Downtown, Calgary
Hilton & Conference Ctr, Calgary
Hilton/Homewood, Calgary
Homewood Airport, Calgary
Hotels (2), Calgary
Hotel Airport, Calgary
Hotels (2) South, Calgary
Marriott Airport, Calgary
Residence Inn, Calgary
Select-Service Hotel, Calgary
Staybridge Suites, Calgary
Wingate Inn Airport, Calgary
All-Suite Hotel, Canmore
Fairholme Lodge, Canmore
Hotel at SilverTip, Canmore
Super 8, Canmore
Super 8, Cochrane
Days Inn, Cold Lake
Extended-Stay, Devon
Pomeroy Hotel, Devon
Comfort Inn, Edmonton
Four Points, Edmonton
Hampton Inn, Edmonton
Hilton Garden Inn Airport, Edmonton
Nova Inn, Edmonton
Pomeroy Inn, Edmonton
Staybridge Suites, Edmonton
Renaissance Clubsport Windermere, Edmonton
Pomeroy Inn and Suites, Fairview
Clearwater Timberlea, Fort McMurray
Holiday Inn, Fort McMurray
Nova Inn, Fort McMurray
Super 8, Fort Saskatchewan
AmeriHost, Grande Prairie
Limited- Service, Grande Prairie
Motel 6, Grande Prairie
Pomeroy Inn & Suites, Grimshaw
Best Western, Lacombe
Comfort Suites, Leduc
Courtyard by Marriott, Leduc
Hampton Inn, Leduc
Hotel, Leduc
Hilton Garden Inn, Lethbridge
Holiday Inn & Suites, Lethbridge
Microtel, Lloydminster
Super 8, Lloydminster
Hampton Inn & Suites, Medicine Hat
Holiday Inn, Medicine Hat
Home2, Medicine Hat
Pomeroy Inn, Olds
Super 8, Oyen
Microtel, Peace River
Nova Inn, Peace River
Ramada, Pincher Creek
Super 8, Ponoka
Hotel, Red Deer
Microtel, Red Deer
Super 8, Red Deer
TownePlace Suites, Red Deer
Extended-Stay, Sherwood Park
Super 8, Slave Lake
Ramada, Stettler
Holiday Inn Express, Strathmore
Hotel, Thorhild
Best Western, Valleyview
Pomeroy Inn & Suites, Vegreville
Best Western, Wainwright
8
EXAMPLES OF HOTELS
APPRAISED OR
EVALUATED (CONT)
British Columbia – Existing Hotels
Holiday Inn Express, Abbotsford
Crystal Square Hilton, Burnaby
Coast Discovery Inn, Campbell River
Pomeroy Inn & Suites, Chetwynd
BW Rainbow Country Inn, Chilliwack
Comfort Inn, Chilliwack
Best Western Chelsea, Coquitlam
Ramada, Coquitlam
Best Western, Dawson Creek
Days Inn, Dawson Creek
George Dawson Inn, Dawson Creek
Pomeroy Inn & Suites, Dawson Creek
Super 8, Fort Nelson
Holiday Inn Express, Fort St. John
Lakeview Inn & Suites, Fort St. John
Pomeroy Inn & Suites, Fort St. John
Stonebridge Hotel, Fort St. John
Super 8, Fort St. John
Resort and Spa, Harrison Hot Springs
Sunshine Inn, Houston
Best Western Towne Lodge, Kamloops
Hotel 540, Kamloops
The Thompson Hotel, Kamloops
Delta Grand Okanagan Resort, Kelowna
Sheraton Four Points, Langford
Best Western Langley Inn, Langley
Holiday Inn Express, Langley
Schooner Cover Hotel, Nanoose Bay
Inn at Westminster Quay, New Westminster
Pinnacle Hotel, North Vancouver
Desert Inn, Osoyoos
Super 8, Osoyoos
Ramada Inn & Suites, Penticton
Travelodge, Penticton
Best Western, Prince George
Coast Hotel, Prince George
Four Points, Prince George
Treasure Cove Hotel, Prince George
Qualicum Heritage Inn, Qualicum Beach
Days Inn, Richmond
Expanded Holiday Inn Express Riverport, Richmond
Radisson Hotel, Richmond
Holiday Inn Express, Squamish
Guildford Inn and Suites, Surrey
Ramada Guildford, Surrey
Sandman Suites Guildford, Surrey
Best Western Plus Downtown, Vancouver
Biltmore Hotel, Vancouver
Comfort Inn Airport, Vancouver
Crowne Plaza Hotel Georgia, Vancouver
Days Inn, Vancouver
Days Inn Downtown, Vancouver
Delta Airport, Vancouver
Delta Pinnacle Hotel, Vancouver
Delta Vancouver Suites, Vancouver
Fairmont, Vancouver
Fairmont Waterfront, Vancouver
Four Points by Sheraton, Vancouver
Georgian Court, Vancouver
Hampton Inn & Suites, Vancouver
Holiday Inn Airport, Vancouver
Holiday Inn Express Airport, Vancouver
Hotel Georgia, Vancouver
Howard Johnson Plaza Hotel, Vancouver
Marriott Pinnacle, Vancouver
Opus Hotel, Vancouver
Pacific Palisades, Vancouver
Pan Pacific Hotel, Vancouver
ParkHill Hotel, Vancouver
Quality Inn Airport, Vancouver
Ramada Airport, Vancouver
Ramada Hotel, Vancouver
Ramada Kingsway, Vancouver
Renaissance Harbourside, Vancouver
Sandman Airport, Vancouver
Shangri-La, Vancouver
Sutton Place, Vancouver
The Opus Hotel, Vancouver
Travelodge Hotel Airport, Vancouver
Westin Bayshore, Vancouver
Best Western Carlton Plaza, Victoria
Brentwood Bay Lodge & Spa, Victoria
Converted Holiday Inn, Victoria
Days Inn Waterway, Victoria
Delta Ocean Pointe, Victoria
Fairmont Empress, Victoria
Harbour Towers, Victoria
Parkside Victoria Resort & Spa, Victoria
Holiday Inn, Westbank
Coast Whistler Resort, Whistler
Delta Whistler Village Suites, Whistler
Whistler Fairways, Whistler
9
EXAMPLES OF HOTELS
APPRAISED OR
EVALUATED (CONT)
British Columbia – Proposed Hotels
Hampton Inn & Suites, Abbotsford
Hotel, Abbotsford
Hotel, Agassiz
Courtyard Hotel, Burnaby
Crystal Square Hilton, Burnaby
Hotel, Burnaby
Super 8, Chemainus
Pomeroy Inn and Suites, Chetwynd
Super 8, Coquitlam
Holiday Inn Express, Courtenay
Super 8, Courtenay
Best Western, Dawson Creek
Super 8, Dawson Creek
Western Discovery Inn & Suites, Dawson Creek
Hotel, Fernie
Super 8, Fort Nelson
Limited-Service, Fort St. James
Casino Hotel, Fort St. John
Hampton Inn, Fort St. John
Pomeroy Hotel and Casino, Fort St. John
Salt Spring Island Wellness Retreat, Ganges
Holiday Inn, Golden
Days Inn, Hudson's Hope
Still Water Inn & Suites, Hudson’s Hope
Hampton Inn, Kamloops
Limited-Service, Kamloops
Park Inn Hotel, Kamloops
Hampton Inn, Kelowna
Holiday Inn, West Kelowna
Four Points, Langford
Quality Inn, Langley
Super 8, Langley
Convention Facilities, Panorama
Hotel, Penticton
Wilderness Lodge, Port Renfrew
Alt, Richmond
Holiday Inn Express, Richmond
Homewood Suites, Richmond
Hotel Study, Richmond
Hotel, Salmon Arm
Resort & Spa, Sechelt
Super 8, Squamish
Summerland Motel, Summerland
Holiday Inn Express, Surrey
Super 8, Surrey
Limited-Service, Terrace
Sunshine Inn, Terrace
Coast Hotel, Tsawwassen
Boutique Hotel, Vancouver
Crystal Blu, Vancouver
Fairmont Convention Centre, Vancouver
Fairmont Hotel, Vancouver
Hilton Downtown, Vancouver
JW Marriott & Autograph Hotels, Vancouver
Marriott Convention Centre, Vancouver
Opus, Vancouver
Radisson Hotel, Vancouver
Regent Hotel, Vancouver
Yaletown Hotel, Vancouver
Fairfield Inn & Suites, Vernon
Holiday Inn Express, Vernon
Pomeroy Inn & Suites, Vernon
Marriott, Victoria
Royal Victoria Hotel, Victoria
Sheraton Four Points, Victoria
Super 8, Westbank
10
EXAMPLES OF HOTELS
APPRAISED OR
EVALUATED (CONT)
Manitoba
Royal Oak Inn, Brandon
Victoria Inn, Brandon
Victoria Inn, Flin Flon
Proposed Super 8 , Portage La Prairie
Proposed Best Western, Thompson
Proposed Super 8, Thompson
Best Western International Inn, Winnipeg
Best Western Pembina Inn & Suites, Winnipeg
Fairmont, Winnipeg
Four Points by Sheraton, Winnipeg
Holiday Inn Airport West, Winnipeg
MainStay Suites, Winnipeg
Proposed Best Western, Winnipeg
Proposed Four Points by Sheraton, Winnipeg
Proposed Porter Hotel, Winnipeg
Proposed Super 8, Winnipeg
Radisson, Winnipeg
Victoria Inn, Winnipeg
New Brunswick
Lakeview Inn & Suites, Fredericton
Sheraton Hotel, Fredericton
Proposed Hotel, Moncton
Proposed Super 8, Moncton
Proposed Super 8, Quispamsis
Proposed Super 8, St. John
Proposed Super 8, St. Stephen
Northwest Territories
Capital Suites, Yellowknife
Chateau Nova and Nova Suites, Yellowknife
Proposed Limited-Service, Yellowknife
Nova Scotia
Proposed Super 8, Bedford
Proposed Hotel, Halifax
Ontario
Proposed Courtyard by Marriott, Hamilton
Ramada Inn, London
Radisson, Markham
Holiday Inn, Mississauga
Proposed Super 8, Napanee
Marriott, Ottawa
Westin, Ottawa
Best Western Inn on the Bay, Owen Sound
Quality Inn, Peterborough
Victoria Inn, Thunder Bay
Fairmont Royal York, Toronto
Inn on the Park, Toronto
Marriott Bloor Yorkville, Toronto
Super 8 North, Toronto
Travelodge, Toronto Airport
Westin Harbour Castle, Toronto
Quebec
Radisson Hotel, Longueil
Chateau Royal, Montreal
Hilton Montréal Bonaventure, Montreal
Hotel Complexe Des Jardins, Montreal
Opus, Montreal
Proposed Boutique Hotel, Montreal
Proposed Microtel Inn & Suites, Montreal
Proposed Super 8, Montreal
Proposed Westin, Montreal
Springhill Suites, Montreal
Holiday Inn Airport West, Pointe-Claire
Saskatchewan
Western Star, Carlyle
Proposed Western Star, Carnduff
Western Star, Esterhazy
Proposed Extended-Stay, Estevan
Proposed Work Camp, Estevan
Proposed Motel 6, Kindersley
Proposed Suburban Exended-Stay, Kindersley
Proposed Canalta, Martensville
Proposed Super 8, Melfort
Proposed Western Star, Melita
Proposed Sigma Inn & Suites, Melville
Proposed Suburban, Moosejaw
Proposed Best Western Plus, Moosomin
Proposed Best Western, North Battleford
Proposed Super 8, Prince Albert
Western Star, Redvers
Proposed All-Suite Hotel, Regina
Proposed Best Western Regina
Proposed Hampton, Regina
Proposed Limited-Service, Regina
Radisson Plaza Hotel, Regina
Super 8, Regina
Wingate Inn, Regina
Delta Bessborough, Saskatoon
Proposed Best Western, Saskatoon
Proposed Hampton Inn, Saskatoon
Proposed MainStay, Saskatoon
Proposed Residence Inn, Saskatoon
Proposed Sleep Inn, Saskatoon
Sandman Hotel, Saskatoon
Saskatoon Inn Hotel & Conference Ctr., Saskatoon
11
EXAMPLES OF HOTELS
APPRAISED OR
EVALUATED (CONT)
Larkspur Landing, Renton, WA
Fairmont Olympic, Seattle, WA
Four Seasons Olympic, Seattle, WA
Hilton, Seattle, WA
Inn at the Market, Seattle, WA
Paramount Hotel, Seattle, WA
SpringHill Suites, Seattle, WA
Summerfield Suites, Seattle, WA
Inn at Semi-Ah-Moo, Semi-Ah-Moo, WA
Saskatchewan (continued)
Western Star, Stoughton
Proposed Full-Service, Swift Current
Proposed Motel 6, Swift Current
Proposed Motel 6, Tisdale
Proposed Microtel, Weyburn
Yukon
Proposed Super 8, Whitehorse
Whitehorse Hotel & Conference Ctr, Whitehorse
USA – Existing Hotels
USA – Proposed Hotels
The Fairmont Princess, Scottsdale, AZ
Embassy Suites, South Lake Tahoe, CA
Holiday Inn Airport, Long Beach, CA
Residence Inn, San Diego, CA
DoubleTree Riverside, Boise, ID
Best Western Inn and Suites, Caldwell, ID
Best Western Foothills Motor Inn, Mountain Home, ID
Sleep Inn, Mountain Home, ID
Sheraton Suites, Chicago O’Hare, IL
Super 8, Hazard, KY
Sheraton Suites, Lexington, KY
Club Hotel by Doubletree, Louisville, KY
Super 8, Prestonsburg, KY
Comfort Inn, Danvers, MA
Comfort Suites, Haverhill, MA
Mainstay Suites, Peabody, MA
Annapolis Marriott, Annapolis, MD
Doubletree Hotel, Rockville, MD
Doubletree, Minneapolis, MN
Kahler Grand, Rochester, MN
Valley River Inn, Eugene, OR
Hilton Garden Inn, Lake Oswego, OR
5th Avenue Suites, Portland, OR
Hotel Vintage Plaza, Portland, OR
Marriott Downtown, Portland, OR
Embassy Suites, Tigard, OR
Holiday Inn, Wilsonville, OR
Wyndham Anatole, Dallas, TX
Comfort Inn, Springfield, VA
Hampton Inn, Springfield, VA
Bellevue Hilton, Bellevue, WA
Candlewood Suites, Bellevue, WA
Larkspur Landing, Bellevue, WA
Residence Inn, Bellevue, WA
Residence Inn, Bellevue, WA
Embassy Suites, Lynnwood, WA
Residence Inn, Lynnwood, WA
BW College Way Inn, Mt. Vernon, WA
Holiday Inn Express, Port Orchard, WA
Hotel and Convention Center, South Lake Tahoe, CA
Hampton Inn and Suites, Red Bluff, CA
Embassy Suites, Boise, ID
Hilton Garden Inn, Boise, ID
Summerfield Suites, Overland Park, KS
Hotel, Blaine, WA
Regional Conf. Centre Analysis, Port Townsend, WA
Boutique Hotel, Seattle, WA
Union Station Hotel, Seattle, WA
Hotel, Silverdale, WA
Davenport Sheraton, Spokane, WA
Convention Center Hotel, Tacoma, WA
Bermuda
Proposed Eco-Tents
12

Proposed Limited-Service Hotel

Transcription

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