Hotel Valuation Software - Additional Description

Consisting of three modules, Hotel Valuation Software (HVS) significantly enhances the user’s ability to analyze and process data into a hotel market study and valuation. The three modules are described as follows:

1. Market Analysis, Occupancy and Average Daily Rate Forecasting Module (Room Night Analysis - RNAADR V3)

   The Room Night Analysis program performs several functions:

   1. It enables the analyst to quantify the demand for transient accommodations within a defined market area. The program identifies both accommodated hotel demand and latent demand which includes unaccommodated and induced demand. This demand can be projected into the future.
   2. It identifies the existing and proposed supply of hotel rooms and enables the user to evaluate the various competitive factors such as occupancy, average room rate and market segmentation of all the hotels in the local market.
   3. Calculates the area-wide occupancy and average daily rate as well as the competitive market mix. Using competitive indices which measure the relative competitiveness of each hotel based on market segmentation the program produces a ten-year forecast of occupancy for each existing and proposed hotel identified by the analyst.

   Based on the room night analysis the software will perform a projection of average daily rate based on a build-up segment by segment rate analysis.

2. Income and Expense Financial Forecasting Module (Fixed Variable FIXVAR V3)

   The key to any hotel market study and valuation is a supportable forecast of revenues and expenses. Hotel revenue and expenses are comprised of many different components that display certain fixed and variable relationships to each other. This program enables the analyst to input comparable financial operating data and forecast a complete 11-year income and expense statement by defining the following inputs:

   1. The projected future occupancy and average rate levels for the subject hotel.
   2. Base year operating data from the subject property or a comparable hotel.
   3. Expected inflation rates for revenues and expenses.

   The output 11-year income and expense statement is formatted in accordance with the Uniform System of Accounts for Hotels.

3. Mortgage Equity - DCF Hotel Valuation Model (HMEV Refi V3 and HMEV VarHoldV3)

   A discounted cash flow valuation model utilizing the mortgage-equity technique forms the basis for this program. By inputting the terms of typical hotel financing, along with a forecast of revenue and expense, the program determines the value that provides the stated returns to the mortgage and equity components. The software allows the following assumptions:

   1. Mortgage component inputs - interest, amortization, loan to value ratio, payments per year, and refinancing of debt
   2. Equity inputs - equity yield
   3. General inputs - terminal capitalization rate, selling expenses, holding period, cash flow and inflation

   The model values the cash flow based on the following three measures- loan to value ratio, debt coverage ratio and debt yield. There are two valuation software modules- one allows variable holding or projection periods and the other incorporates an inputted refinancing at some point during the projection period.

4. Tabbed Version of Hotel Valuation Software

   Hotel Valuation Software comes in two versions - a tabbed version and a version without tabs. By purchasing the software through HVS, you will receive the enhanced tabbed version of the software. The tabbed version contains tabs along the bottom of each page that enables users to get into the calculation sections of the software. This allows you to view the actual calculations taking place within the software so you can make modifications when appropriate. For example, in the FIXVAR software which projects income and expense you can adjust the reserve for replacement calculation so the reserve for replacement percentage will build up each year, for example 3% in Year 1, 4% in Year 2 and 5% thereafter. In the untabbed version you cannot make these modifications.

   This enhanced version of the Hotel Valuation Software is significantly more powerful than the untabbed version.