Hospitality valuations

Hospitality Valuations

At Lotus Amity we provide hospitality valuations. We value cafes, restaurants, pubs and hotels. we provide these valuations in disputes and transactions and for tax purposes.

Often, a key focus of hospitality valuations is the location of the venue(s) and the lease agreement(s). Related hospitality valuation considerations include the terms of the lease agreement such as the renewal period and termination clauses, foot traffic and location outlook and development.

Other key hospitality valuation components include staffing, tourism, monthly sales trends, initial fit-out costs and expected life, occupancy rates, supplier agreements, population growth, consumer health trends and legislation.

Specific industry issues include the Excise Remissions Scheme to the distillery industry and the Office of Liquor and Gaming Regulation for the electronic gaming machines for hotels and pubs. 

Experience

Hospitality valuation engagements have included the following engagements:

• Valuation of a hotel pub group, comprising of freehold and leasehold pubs and bottle stores. Valuation of the shares required for tax purposes in relations to a scrip for scrip transaction. Key valuation issues included the difference in the revenue sources between pubs (such as gaming income, bar and food income, accomodation, bottle store income and drive in income), proposed refurbishment and development expenditure and the impact on future revenue and margins, and the impact of special shares and management fees. Weighted Income Approach and Market Approach adopted. Under the Income Approach a Discounted Cash Flow method used with different sales and margin scenarios based on expected capital expenditure. Under a Market Approach, revenue and earnings multiples applied based on prior acquisitions. 
• Valuation of a distillery with a 60,000 LAL capacity. Valuation report required for the tax office in relation to a restructure. Key valuation issues included the valuation of an intellectual property agreement in relation to the licensing of the distillery process, trade marks, lease agreement, potential production and sales volume, bottling and distribution costs, marketing costs, value of maturing liquor, and research and development costs. Weighted Cost Approach and Income Approach used. Under the Cost Approach a Replacement Cost method adopted. Under the Income Approach a Discounted Cash Flow method used with different production, sales volume and price scenarios. 
• Pricing advice in relation to the potential value of a restaurant if the lease were to be terminated. Pricing provided without the existence of the current demolition clauses under the tenancy agreement. Valuation guidance provided under the income approach using net profit benchmarks and comparable pricing.
• Pricing advice in relation to fast food restaurants seeking to raise finance through a master franchisor structure.
• Valuation of two café and take aways. Valuation report prepared to assist in mediation in a shareholder dispute.
• Quantification of lost profit for a restaurant and coffee shop. Expert report prepared in breach of contract matter.