We are pleased to present this comprehensive glossary, designed as a special service to our valued clients. Buying and selling real estate in the hotel industry requires a deep understanding of a variety of terms specific to this industry. This overview has been developed to provide you with an easy-to-understand guide to this complex terrain and to answer frequently asked questions (FAQ).
Hotel properties and their characteristics
Definition:
A building or facility used for the operation of a hotel.
Quality criteria: Location, location-destination, size, year of construction, facilities, target market, competitive environment, management performance, etc.
The services offered by a hotel can vary depending on category, target group and location. Here are some typical services and facilities that hotels can offer:
- Accommodation: Single, double or family rooms, suites, apartments.
- Catering: Restaurants, bars, cafés, room service, breakfast buffet.
- Function rooms: Conference rooms, banqueting halls, meeting facilities.
- Leisure facilities: Fitness centre, pool, spa, sauna, wellness facilities.
- Services: Reception, concierge service, dry cleaning, laundry service.
- IT equipment: Internet, conference technology, entertainment systems.
- Security: Security service, surveillance cameras, access control.
- Transport: Shuttle service, parking, car hire.
- Tourist services: Excursion advice, city tours, ticket service.
- Pet-friendly services: Pet-friendly rooms, pet feeding service.
- Hotel residences: Hotels combined with permanent accommodation options.
- Boutique hotels with retail: Small, individual hotels in combination with retail space.
- Hotel-office combinations: Hotels integrate office space for business travellers or coworking spaces.
- Themed hotels with entertainment: Hotels that offer special entertainment elements or attractions.
- Hotel apartments: Combination of hotel and apartment services for long-term stays.
- Hotels in combination with educational or health facilities: Hotels in combination with educational institutions or health centres.
- Eco-hotels with agriculture: Hotels that focus on ecological sustainability and operate their own agricultural land.
Hotels are special commercial properties and follow a different valuation logic than residential properties.
Differentiation: A hotel is considered a commercial property as it has a commercial purpose and generates income from the accommodation of guests. In contrast, residential properties are primarily used for private residential purposes.
Financing aspects: Commercial real estate financing often has specific conditions and requirements compared to residential real estate financing. Key financing aspects include the income generated by a hotel, creditworthiness, interest rate risks and the required debt ratio.
Hotel conceptualisation
Definition: A comprehensive plan that describes the hotel’s design, services and target group.
Important aspects: Hotel style, target market, service level.
Definition: A comprehensive review of a hotel’s geographic location, including accessibility, attractiveness of the location, competitive environment and target audience.
Analysis: A key factor influencing the success of the hotel, as the location influences demand, competitive position and market positioning.
Definition: A systematic examination of the strengths and weaknesses of a hotel’s direct competitors in order to identify strategic advantages.
Explanation: Competitor analysis informs decisions about positioning, pricing and marketing.
Definition: The evaluation of current market conditions and trends to identify opportunities and risks for the hotel business.
Explanation: Market analyses help to align what is offered with the needs of the target group.
Definition: A comprehensive examination of the attractiveness and competitiveness of a particular geographic destination for the tourism market.
Explanation: Destination analysis looks at local resources, competitors and market trends.
Definition: A comprehensive identification and description of the specific target group that a hotel wants to address.
EExplanation: A precise target group definition is crucial for marketing strategies and service offering.
Definition: The positioning of a hotel in the market in terms of price, target group, service quality and competitiveness.
Aspects: Market research, unique selling points, competition analysis.
Definition: The focus on specific services, facilities or experiences in order to stand out from competitors.
Explanation: Offer specialisation helps to achieve a unique positioning in the market.
Definition: A strategy in which a hotel deliberately emphasises unique features in order to stand out from other competitors.
Explanation: Differentiation can be achieved through design, service quality, or marketing approaches.
Definition: Long-term planning and setting of prices to influence the market position, profitability and perception of the brand.
Explanation: Pricing strategy takes into account competitive factors, costs, market demand and brand positioning.
Definition: A distinct identity or labelling that distinguishes a hotel from others and creates certain associations and expectations for customers.
Explanation: A strong hotel brand can build trust, promote loyalty and influence positioning in the market.
Definition: A hotel company that operates several hotels under a common brand and has a centralised management.
Explanation: Chain hotels often offer consistent standards and can benefit from shared resources.
Definition: An independent hotel that is not part of a hotel chain and often has a unique character and style.
Explanation: Individual hotels can be more flexible in their orientation and guest service.
Definition: A category of event tourism that focuses on meetings, incentive travel, conferences and exhibitions.
Explanation: MICE tourism contributes to room occupancy and revenue diversification.
Hotel performance
Definition: The net inflow of funds into a company, calculated as revenue less expenses during a given period.
Definition: A measure that represents the ratio of profit or loss against the cost of an investment. It is often expressed as a percentage.
Definition: The operating expenses or ongoing operating costs necessary to maintain and operate a business.
Definition: A key figure that measures revenue per available room.
Analysis: Indicator for the efficiency of room occupancy and pricing.
Definition: The percentage of available rooms that are occupied at a given time.
Analysis: Indicator of the hotel’s occupancy rate, influences RevPAR.
Definition: The gross profit generated by the hotel’s operating activities before deducting administrative costs.
Analysis: Measure of the profitability of the operating business.
Definition: The average daily rate for a hotel room, calculated by dividing the total revenue by the number of rooms sold.
Analysis: Helps to determine pricing strategies and revenue forecasts.
Definition: The dynamic adjustment of room rates based on demand and occupancy to maximise total revenue.
Analysis: Optimisation of revenue through flexible pricing.
Definition: Consulting services that focus on various aspects of the hotel industry, including operations management, marketing, financial planning and strategic development.
Analysis: Hotel consultants provide expertise and advice to help hotel operators and owners achieve their business goals and increase operational efficiency.
Contract design between owner and operator
Definition: A contract between the owner and operator that regulates the conditions for the operation of the hotel.
Types of contract: Full service, management-only, franchise.
Definition: Consulting services that focus on the negotiation, drafting and implementation of management contracts between owners and hotel operators.
Explanation: Consultants assist in negotiating fair terms and ensuring that the interests of both parties are taken into account.
Definition: Remuneration for the management company for the operational management of the hotel business, which is to be paid by the hotel owner.
Definition: A contract that gives the operator the right to run the hotel in exchange for rental payments.
Types of contract: Fixed lease, turnover lease.
Definition: A contract that allows the hotel to use an established brand and business methods.
Analysis: Fee structure, brand reputation, franchisor support.
Definition: The process by which a hotel company develops and offers franchise opportunities to investors.
Explanation: Franchise developers assist potential franchisees in implementing a hotel under an established brand and assist with training and operating guidelines.
Hotel architecture, large-scale renovation and alternative uses
Definition: The specialised planning and design of hotels, taking into account both aesthetic and functional aspects.
Explanation: Hotel architects design rooms that meet the needs of guests and operational requirements.
Definition: the process of planning, designing and implementing a new hotel project, including site analysis, financing, construction and market launch.
Explanation: Project developers coordinate various aspects to realise a successful hotel project from the initial idea to the opening.
Definition: A detailed list of the rooms and functions envisaged in a hotel or property, including their size, location and use.
Explanation: The space programme serves as the basis for the planning and development of buildings in order to meet functional requirements.
Definition: The ratio between the usable area of a property and the total area, which measures the efficiency of space utilisation.
Explanation: Higher space efficiency can lead to more cost-effective operation and better profitability.
Definition: A company that is responsible for the overall planning, execution and coordination of a construction project.
Explanation: General contractors assume overall responsibility for construction work and coordinate subcontractors.
Definition: The planning, coordination and control of a construction project from conception to completion.
Explanation: Project managers monitor schedules, budgets, quality and risks to ensure that the project is completed successfully
Definition: A construction technique in which building elements are prefabricated in standardised modules and then assembled on site.
Explanation: Modular construction allows for faster construction time, cost efficiency and more precise control over construction processes.
Definition: The management and monitoring of costs during the construction process to ensure that the budget is met.
Explanation: Construction cost control includes estimating, budgeting, cost monitoring and adjustments to achieve financial targets.
Definition: A fund reserved for future renovations and maintenance work.
Explanation: Guarantee of the long-term value retention of the property.
Definition: Hotels located in scenic areas or holiday resorts, often offering extensive leisure facilities and services.
Characteristics: Pool facilities, spa, entertainment, sports facilities.
Definition: Fully furnished apartments that are rented out on a short or long-term basis and offer hotel services such as cleaning and reception.
Characteristics: Combination of home comforts with hotel services, popular with business travellers and long-term stays.
Definition: A form of housing where people live in communal spaces and share resources to promote social interaction and cost efficiency.
Characteristics: Communal spaces, shared activities, flexible living arrangements.
Definition: Residential facilities specifically designed to meet the needs of older people, often offering care and nursing services.
Characteristics: Barrier-free facilities, communal areas, medical care.
Definition: Property projects that combine different types of use such as residential, commercial, retail and hotel.
Analysis: Synergies between different types of use, diversification of risk.
Strategic hotel investment (purchase and sale)
Definition: The person or organisation that owns the hotel property.
Analyses: Financial stability, long-term goals, risk tolerance.
Definition: A long-term plan that sets out the hotel owner’s goals and courses of action with respect to investment, operation and performance of the property.
Aspects: Returns expectations, risk tolerance, exit strategy.
Definition: The party responsible for the day-to-day operation of the hotel.
Analyses: Experience, brand image, operational efficiency.
Definition: The long-term planning and direction of all aspects of hotel operations to gain competitive advantage and achieve corporate objectives.
Explanation: Strategic hotel management includes decisions in areas such as marketing, finance, operations and human resources.
Definition: Investment in long-term assets such as renovations, modernisation and maintenance.
Analysis: Consideration of long-term capital expenditure in financial planning.
Definition: A form of financing that has both equity and debt characteristics. Mezzanine capital is located between equity and debt in the capital structure.
Definition: Strategic measures to increase the value of a hotel property, including renovations, service improvements and market positioning.
Aspects: Cost efficiency, market trends, guest needs.
Definition: The professional management of assets to maximise their value and profitability.
Analysis: Efficient utilisation of resources, risk management.
Definition: Advisory services that focus on the purchase, sale or merger of hotel properties.
Explanation: Transaction advisors assist with the identification of investment opportunities, negotiations, due diligence and the execution of transactions.
Definition: The process of buying, selling or leasing hotel property through an agent or broker.
Explanation: Property brokers facilitate the transaction process by bringing buyers and sellers together, conducting negotiations and carrying out documentation.
Definition: A comprehensive examination of the hotel property before purchase or takeover.
Analyses: Finances, legal aspects, operating performance.
Definition: The process of determining the economic value of a property, based on various methods (e.g. income capitalisation approach, net asset value approach or comparative value approach or a mixture of different methods) and criteria.
Explanation: Property valuations are crucial for buying, selling, financing and portfolio analyses.
Definition: The current estimated value of a property on the open market, based on current market conditions, comparable sales and other factors.
Explanation: The market value is the price that a well-informed buyer is willing to pay and that a well-informed seller is willing to accept.
Definition: The formal establishment and authentication of legal transactions by a notary to ensure their legality and binding nature.
Explanation: Notarisation is required in many countries in order to make certain contracts, such as purchase agreements or land register entries, legally valid. The notary supervises the process, ensures the identity of the contracting parties and archives the certificate.
Definition: A percentage that represents the annual profit in relation to the market value of the property.
Analysis: Helps to assess the profitability of a hotel investment.
Definition: A method of property valuation that determines the value of a property based on the future income it can generate.
Explanation: Takes into account rental income, operating costs and capitalisation rates to derive the capitalised earnings value.
Definition: A method of property valuation that determines the value of a property based on replacement cost less depreciation.
Explanation: Focuses on the physical value of the property and does not necessarily take into account its income potential.
Definition: A method of property valuation in which the value of a property is determined by comparing it to similar, recently sold properties.
Explanation: Based on market comparisons to determine the market value of the property being valued.
Definition: A property transaction that focuses on the sale or purchase of a specific asset, such as a property.
Explanation: The buyer acquires the physical asset and often also assumes liabilities and contracts.
Definition: A property transaction in which shares or stocks are acquired in a company that owns the assets, rather than the assets themselves.
Explanation: The buyer acquires control of the company and thus ownership of the property without directly transferring the assets.
Definition: An investment strategy in which investment decisions are based on the creation of long-term value rather than just short-term profit.
Definition: The plan for how the owner intends to liquidate or dispose of the hotel investment in the future.
Analyses: Market trends, future developments.