Hotel Brand Market Value Article
© 2006 CORNELL UNIVERSITY
DOI: 10.1177/0010880406289070
Volume 47, Issue 3 1-14
The Role of Brand
Affiliation in Hotel
Market Value by JOHN W. O’NEILL and QU XIAO
The notion that a hotel’s brand contributes significantly to the property’s market value is supported by an analysis of nearly eleven hundred hotel transactions over the past fifteen years. The analysis found that brands added value beyond the usual contributors to a property’s value, such as net operating income and revenue per available room. The effects of branding were most noticeable in midmarket and upscale hotels. Based on per-room sales statistics, certain brands added significantly more value to their franchisees’ properties than others.
Keywords:
A
hotel valuation; brand management
hotel property’s brand identification is clearly a large factor in its market value, but measuring the brand’s contribution to a property’s market value has so far been as much “art” as
“science.”1 A number of financial indicators are used to determine a property’s value. Net operating income
(NOI), average daily rate (ADR), occupancy rate, and
AUGUST 2006
even number of rooms have proven to be significant predictors of a hotel’s market value.2 Despite the clear indication that brand affiliation contributes to hotel value, existing research has neither confirmed that notion nor evaluated the relative strengths of various brands.3 Assertions in hotel trade magazines that different hotel brands contribute differently to hotel value have not been based on rigorous, scientific research design and statistical procedure.4 Indeed, an article published in the previous Cornell Quarterly found that certain brands added more to hotel value than others did. Because those data were disguised, it was not possible to determine which brand contributed the greatest value.5 In the research presented here, we undertake to conduct a rigorous analysis of brands’ contribution to property values.
Few developments have altered the
DOI: 10.1177/0010880406289070
Volume 47, Issue 3 1-14
The Role of Brand
Affiliation in Hotel
Market Value by JOHN W. O’NEILL and QU XIAO
The notion that a hotel’s brand contributes significantly to the property’s market value is supported by an analysis of nearly eleven hundred hotel transactions over the past fifteen years. The analysis found that brands added value beyond the usual contributors to a property’s value, such as net operating income and revenue per available room. The effects of branding were most noticeable in midmarket and upscale hotels. Based on per-room sales statistics, certain brands added significantly more value to their franchisees’ properties than others.
Keywords:
A
hotel valuation; brand management
hotel property’s brand identification is clearly a large factor in its market value, but measuring the brand’s contribution to a property’s market value has so far been as much “art” as
“science.”1 A number of financial indicators are used to determine a property’s value. Net operating income
(NOI), average daily rate (ADR), occupancy rate, and
AUGUST 2006
even number of rooms have proven to be significant predictors of a hotel’s market value.2 Despite the clear indication that brand affiliation contributes to hotel value, existing research has neither confirmed that notion nor evaluated the relative strengths of various brands.3 Assertions in hotel trade magazines that different hotel brands contribute differently to hotel value have not been based on rigorous, scientific research design and statistical procedure.4 Indeed, an article published in the previous Cornell Quarterly found that certain brands added more to hotel value than others did. Because those data were disguised, it was not possible to determine which brand contributed the greatest value.5 In the research presented here, we undertake to conduct a rigorous analysis of brands’ contribution to property values.
Few developments have altered the