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Agenda

1. Valuation Approach

2. Practical Examples Using Each Method

3. Overview of the Hotel Market

Valuation Approach1

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Principal Methods

Income Capitalisation1

Discounted Cash Flow (DCF)2

Market Comparison – Comparable Method 3

Three primary methods of hotel valuation:

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Income Capitalisation

� Review of historic, current and budget trading

� Project forward 1, 3 or 5 years to stabilised year /fair

maintainable level

� Capitalise stabilised EBITDA adopting an appropriate yield

� Deduct aggregate profit shortfalls from capital value

� Deduct CAPEX amount and purchaser’s costs (4.46%)

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Discounted Cash Flow

� Review historic, current and budget trading figures

� Run 10 year projections

� Projected EBITDA over 10 years is discounted to present

day values

� Capitalised EBITDA in year 10 is also discounted to

present day values

� Factor future CAPEX into cashflow (if appropriate)

� Deduct purchaser’s costs

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Comparable Method

� Analyse recent sales on a price per bedroom basis

� Apply to hotel being valued

� Ensure both hotels are comparable

� Check method only – not primary valuation method

� Be careful – results can be very misleading

Practical Examples2

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Made-Up Hotel

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Toolsfor the Preparation of a Valuation

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Discussions with Management

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Historic TradingMade-Up Hotel Historic Trading

Year End December December December December December December

Year 2008 2009 2010 2011 2012 2013

Actual Actual Actual Actual Actual Forecast

No of Rooms 150 150 150 150 150 150

Occupancy 68.5% 58.4% 71.2% 74.9% 75.8% 76.7%

ADR €176.00 €155.00 €134.00 €151.00 €153.00 €155.00

RevPAR €120.55 €90.59 €95.45 €113.08 €115.97 €118.90

TOTAL REVENUE €9,700,000 €7,100,000 €7,465,000 €8,400,000 €8,700,000 €9,000,000

TOTAL DEPARTMENTAL EXPENSES €4,656,000 €3,430,720 €3,511,536 €4,069,800 €4,153,380 €4,230,000

% of Total Revenue 48.00% 48.32% 47.04% 48.45% 47.74% 47.00%

TOTAL DEPARTMENTAL PROFIT €5,044,000 €3,669,280 €3,953,464 €4,330,200 €4,546,620 €4,770,000

% of Total Revenue 52.0% 51.7% 53.0% 51.6% 52.3% 53.0%

TOTAL UNDISTRIBUTED EXPENSES €2,386,200 €1,731,690 €1,822,207 €1,940,400 €2,018,400 €2,088,000

% of Total Revenue 24.6% 24.4% 24.4% 23.1% 23.2% 23.2%

GROSS OPERATING PROFIT €2,657,800 €1,937,590 €2,131,258 €2,389,800 €2,528,220 €2,682,000

27.4% 27.3% 28.6% 28.5% 29.1% 29.8%

NET OPERATING PROFIT / EBITDA €1,891,500 €1,278,000 €1 ,474,338 €1,735,440 €1,861,800 €2,115,000

% of Total Revenue 19.50% 18.00% 19.75% 20.66% 21.40% 23.50%

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ProjectionsMade-Up Hotel Cash Flow Projections

Year End September September September

Projections (Present Values)

1 2 3

Year 2014 2015 2016

Projected Projected Projected

No of Rooms 150 150 150

Rooms Available 54,750 54,750 54,750

Rooms Sold 41,500 41,700 42,200

Occupancy 75.80% 76.16% 77.08%

ADR €155.00 €156.00 €158.00

RevPAR €117.49 €118.82 €121.78

Rooms €6,432,500 €6,505,200 €6,667,600

Total Revenue €9,009,104 €9,162,254 €9,390,986

TOTAL DEPARTMENTAL EXPENSES €4,144,638 €4,173,865 €4,278,064

% of Total Revenue 46.00% 45.56% 45.56%

TOTAL DEPARTMENTAL PROFIT €4,864,466 €4,988,389 €5,112,922

% of Total Revenue 54.0% 54.4% 54.4%

TOTAL UNDISTRIBUTED EXPENSES €1,982,003 €1,992,790 €2,019,062

% of Total Revenue 22.0% 21.7% 21.5%

GROSS OPERATING PROFIT €2,882,463 €2,995,599 €3,093,860

32.0% 32.7% 32.9%

NET OPERATING PROFIT /EBITDA €2,257,231 €2,370,733 €2, 469,360

% of Total Revenue 25.05% 25.87% 26.30%

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Income Capitalisation Example

2008 (Actual) €9.70m €1.89m

2009 (Actual) €7.10m €1.28m

2010 (Actual) €7.47m €1.47m

2011 (Actual) €8.40m €1.74m

2012 (Actual) €8.70m €1.86m

2013 (Forecast) €9.00m €2.16m

2014 (Projection) €9.00m €2.25

2015 (Projection) €9.16m €2.37m

2016 (Projection) €9.39m €2.47m

FOUR STAR, 150 BEDROOM DUBLIN CITY CENTRE HOTEL

(MILLION) TURNOVER EBITDA

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€0.10 m- =

Income CapitalisationCalculating Shortfall

€0.22 m

TotalShortfall

€0.32m

- =

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Valuation

Stabilised EBITDA €2.47m

Yield 8%

YP (multiple) 12.5

Gross Value €30.875m

Less Shortfall €0.32m

Less Capex €0m

Gross Value €30.55m

Less costs (4.46%) €29.25m

Value per Bedroom €195,000

INCOME CAPITALISATION

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Discounted Cash Flow

Year 1 2 3 4 5 6 7 8 9 10Sale in Year 10

September 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenue €9,009 €9,345 €9,770 €9,966 €10,165 €10,368 €10,576 €10,787 €11,003 €11,223

€ ‘000’s

EBITDA €2,257 €2,418 €2,569 €2,620 €2,673 €2,726 €2,781 €2,837 €2,893 €2,951 €36,889CAPEX €0 €0 €0 €0 €0 €0 €0 €0 €0 0

Cash Flow after CapEx €2,257 €2,418 €2,569 €2,620 €2,673 €2,726 €2,781 €2,837 €2,893 €2,951

Running Yield 7.45% 7.98% 8.48% 8.65% 8.82% 9.00% 9.18% 9.36% 9.55% 9.74%

Valuation (DCF)

Exit Yield 8.00%

Discount Rate 10.00%Value

pre-CapEx Analysis NPV Gross Value €30,307 Net value €28,955

CapEx if not in Cash Flow €0 Number of rooms 150

€30,307 Net value per room €193,033

Costs 4.46% IRR 9.88%

NET VALUE €28,955Net Initial Yield 7.45%

Value per bedroom €193,033

Market Overview3

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Market Yields

LOCATION YIELD MULTIPLE Dublin Prime 7.00% - 8.00% 12.5 – 14.3

Dublin Secondary 8.00% - 9.50% 10.5 – 12.5

Other Cities/Major Towns Prime 8.50% - 11.50% 8.7 - 11.7

Other Cities/Major Towns Secondary

9.50% - 13.0% 7.7 - 10.5

Provincial Town 11.0% - 15.0% 6.66 – 9.0

Other 12.0% - 16.0% 6.25 - 8.3

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Dublin Hotels PerformanceImprovements continue throughout 2013

Source |STR Global

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Value of Hotel Transactions in Ireland

Source | CBRE Research

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Investment In Hotels Ireland 2013 (To Q3)€106m in 20 transactions in first nine months of 20 13

Source | CBRE Research

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Recent Key Hotel Sales 2012/2013

DUBLIN 4501 bedrooms €67million€133,733 per room

DUBLIN 1138 bedrooms€22 million€159,420 per room

DUBLIN 2195 bedrooms€35 million approx.€179,487 per room

Co. Mayo83 bedrooms€20 million approx.€240,964 per room

CORK150 bedrooms€5.0 million approx.€33,333 per room

Cork131 bedrooms€21 million€160,305 per room

Kildare 36 bedrooms & 33 Lodges€2.5 million€36,231

Wicklow51 bedroomsExcess €1 million.

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Hotels Currently on the Market

Wexford60 BedroomsGuide: €950,000€15,833 per bedroom

Dublin 181 bedroomsGuide €30 million

Limerick151 bedroomsGuide: €3.0 million €19,868 per room

Limerick154Guide: €4.0 million€25,974 per room

Kildare52 bedrooms32 Apts, 15 cottages Guide: €4-5 million

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Q&AAnn Marie O’Byrne | Director