Hotel/Motel Buildings

Comprehensive Appraisal of Hotel/Motel Buildings in California


In the commercial real estate industry, hotel and motel buildings represent a unique and dynamic sector. At PM Appraisal, we bring specialized expertise and an informed perspective to the complex process of valuing these properties. Understanding the nuances of this property type and applying the most suitable appraisal methods, we provide our clients with accurate, reliable, and comprehensive appraisals.

Understanding the Hotel/Motel Building Category

Hotels and motels are designed to provide temporary accommodation for travelers, tourists, and sometimes locals in need of short-term stays. They range from small, budget-friendly motels to luxurious world-class hotels and resorts. Each property’s value is influenced by factors such as location, condition, service level, facilities, brand affiliation, operational efficiency, and economic trends.

Prime location is essential for hotels and motels as it directly impacts occupancy rates and revenue. A property near tourist attractions, business districts, airports, or along a busy highway usually enjoys higher demand. The hotel’s facilities, such as restaurants, conference rooms, recreational amenities, and the number and type of rooms, significantly contribute to its marketability and profitability.

Types of Hotel/Motel Buildings

The hotel and motel category is diverse, with each type catering to a different clientele and having its own operational model. Here are some common types:

  1. Limited-Service Hotels: These hotels usually offer basic services with no amenities such as on-site restaurants or convention spaces.
  2. Full-Service Hotels: These are typically mid-scale to luxury hotels with a full range of services and facilities such as room service, a restaurant, a gym, and conference rooms.
  3. Boutique Hotels: These are smaller hotels with a more intimate, unique, or luxurious atmosphere.
  4. Extended-Stay Hotels: Designed for long-term guests, they offer amenities like a kitchenette in each room and may provide a discount for longer stays.
  5. Resort Hotels: These are usually located in vacation destinations and offer luxurious amenities such as spas, golf courses, and recreational activities.
  6. Casino Hotels: These properties combine a hotel with a gambling facility.
  7. Conference and Convention Hotels: Large hotels designed to host conferences and conventions in their extensive facilities.
  8. Economy Motels: These offer basic, budget-friendly accommodation primarily catering to motorists.
  9. Bed and Breakfast (B&Bs): These small establishments offer personal service and are often located in residential areas or historic buildings.
  10. Hostels: These offer budget accommodation with shared rooms and communal facilities, popular with young or solo travelers.
  11. Timeshares: These properties sell customers the right to use the property for a specific week each year or points to use at various locations.
  12. Vacation rentals: These include properties such as condominiums or villas that are rented out on a short-term basis, often through platforms like Airbnb.

Best Ways to Appraise Hotel/Motel Buildings

Appraising hotel and motel properties requires a unique approach because of the integrated business and real estate components. Here are some best ways to appraise these buildings:

  1. Income Capitalization Approach: Since hotels and motels are income-generating properties, this approach is commonly used. It involves estimating future net income and capitalizing this income into a present value.
  2. Sales Comparison Approach: Comparing the subject property with similar properties that have recently sold can provide valuable insights. However, finding comparable sales can be challenging due to the unique nature of each hotel or motel.
  3. Cost Approach: This approach considers the cost to construct a similar property. It’s typically used when the property is new or has unique features, and comparable sales are hard to find.
  4. Franchise Affiliation Consideration: Hotels and motels associated with well-known franchises may hold higher value due to their established customer base, operational support, and marketing advantages.
  5. Market Study: A thorough market study is critical to understanding a hotel or motel’s competitive set and market demand.
  6. Amenities and Services: The quality and range of services and amenities offered by the property should be taken into account. These may include restaurants, meeting spaces, swimming pools, fitness centers, and concierge services.
  7. Economic Trends Analysis: Given the sensitivity of hotels and motels to economic cycles, it’s essential to consider current and forecasted economic trends.

At PM Appraisal, we understand the complexities involved in appraising hotel and motel properties. Our team of skilled appraisers applies the appropriate methodology and keeps abreast of market trends to provide our clients with an accurate and reliable valuation, giving them the confidence to make informed decisions about their hotel/motel properties.