You are selling, buying or financing a hotel in France, or you need to fix its value in a partition or a dispute. A hotel is neither simply a building nor simply a business: its value depends on its ability to generate an operating result, and that ability is inseparable from the premises. This article presents seven methods, each with an example, then applies them to the same fictional establishment to show how the results cross-check.
What the standards say
The Charte de l’expertise en évaluation immobilière (French property valuation charter, 6th edition, November 2025) deals with these assets in two places. Methods based on trading accounts (Title III, § 2.4) apply to “specialised properties (hotels, leisure centres, theatres)” and rest on the operator’s accounts, often starting from EBITDA, stripping out the outperformance of a particular operator and distinguishing the value of the property from that of the business. Methods based on professional ratios (§ 2.9) target single-use properties “whose value is inseparable from the activity carried on there”; they require accounts over several years and must be cross-checked by comparison.
TEGOVA’s European Valuation Standards 2025 say the same for properties valued on their trading profits, “such as hotels”, and describe value per room as a simplified approach, useful as a check. The Charter sums it up elsewhere: “No method is universal.” Hence the value of crossing them. Valuations are carried out net of VAT.
1. Income capitalisation
This is the most common method. Calculate net operating income (turnover less operating expenses), choose a capitalisation rate reflecting the market, the location and the category of the hotel, then divide.
Example: net income of €1,000,000 and a rate of 7 % give 1,000,000 / 0.07 = €14,285,714.
2. Comparison
From recent sales of comparable hotels (location, size, category), derive ratios, price per room or income multiple, and apply them to the hotel being valued.
Example: average price of €100,000 per room in the references, 50-room hotel, estimated value €5,000,000.
3. Discounted cash flow (DCF)
Project income and expenses over five to ten years, discount each annual flow at a rate reflecting the risk, then add a discounted terminal value.
Simplified three-year example at 10 %: flows of €1,000,000, €1,100,000 and €1,200,000. Present value = 1,000,000 / 1.1 + 1,100,000 / 1.1² + 1,200,000 / 1.1³ = €2,719,760.
4. Replacement cost
Estimate the cost of rebuilding the building as new, apply physical and functional depreciation to that cost, then add the value of the land, which does not depreciate.
Example: rebuilding cost €10,000,000, depreciation 20 %, land €2,000,000. Value = 10,000,000 × 0.8 + 2,000,000 = €10,000,000.
It gives a useful ceiling but says nothing about profitability; the Charter reserves it mainly for specialised properties that are rarely sold, with no comparable references (§ 2.5).
5. Sector multipliers
The sector uses standard ratios: three to five times annual revenue per available room (RevPAR), two to four times turnover, eight to twelve times net income. These wide ranges must be calibrated on recent local transactions.
Example: annual RevPAR of €30,000, 100 rooms, multiplier of 4. Value = 30,000 × 100 × 4 = €12,000,000.
6. Income split
Break the income down into its components (property, furniture and equipment, business), apply to each its own capitalisation rate, higher for the riskier components, and add them up.
Example: property income of €800,000 at 7 %, furniture income of €100,000 at 20 %, business income of €100,000 at 25 %. Value = 11,428,571 + 500,000 + 400,000 = €12,328,571.
7. The hotel method
This method, widely used in France, starts from the principle that a hotel is worth the theoretical rent it can bear, acceptable to both an owner and an operator.
- Theoretical turnover = number of rooms × occupancy rate × average daily rate × 365.
- Theoretical rent = 20 to 30 % of that turnover, depending on the category, location and age of the establishment.
- Value = theoretical rent / capitalisation rate.
Example: three-star hotel with 100 rooms, occupancy 70 %, average rate €80. Theoretical turnover = 100 × 0.70 × 80 × 365 = €2,044,000. Theoretical rent at 25 % = €511,000. Value at 6 % = €8,516,667.
It frees itself from the actual accounts, which may reflect the particular quality of a manager, but relies on standard assumptions (occupancy, rent share, rate) that must be justified one by one. Ancillary income (restaurant, spa, conferences) is added through an additional percentage.
Worked example: the hotel Le Magnifique
Four-star hotel in a large French city, 150 rooms, restaurant, bar, spa and conference room, built fifteen years ago, in good condition. Turnover of €7,500,000 net of VAT, net operating income of €2,250,000, RevPAR of €120 net of VAT, occupancy 75 %, average daily rate €160 net of VAT.
Capitalisation. Rate adopted 6.5 %: 2,250,000 / 0.065 = €34,615,385.
Comparison. Average price per room in comparable sales €230,000: 150 × 230,000 = €34,500,000.
DCF. Net income growth of 2 % a year over five years, discount rate 8 %, terminal value at 7 % on year 6 income.
| Year | Net income | Present value |
|---|---|---|
| 1 | €2,250,000 | €2,083,333 |
| 2 | €2,295,000 | €1,967,593 |
| 3 | €2,340,900 | €1,858,282 |
| 4 | €2,387,718 | €1,755,044 |
| 5 | €2,435,472 | €1,657,542 |
Terminal value: 2,484,182 / 0.07 = €35,488,312, or €24,152,749 discounted. Total: €33,474,542.
Replacement cost. Rebuilding €30,000,000, depreciation 15 %, land €8,000,000: 30,000,000 × 0.85 + 8,000,000 = €33,500,000.
Multipliers. Annual RevPAR of 120 × 365 = €43,800, multiplier 4.5: 43,800 × 150 × 4.5 = €29,565,000.
Income split. Property €1,800,000 at 6 %, furniture €300,000 at 15 %, business €150,000 at 20 %: 30,000,000 + 2,000,000 + 750,000 = €32,750,000.
Hotel method. Theoretical turnover = 150 × 0.75 × 160 × 365 = €6,570,000. Theoretical rent at 25 % = €1,642,500. Value at 5.5 % = €29,863,636.
Summary
| Method | Value |
|---|---|
| Income capitalisation | €34,615,385 |
| Comparison | €34,500,000 |
| DCF | €33,474,542 |
| Replacement cost | €33,500,000 |
| Multipliers | €29,565,000 |
| Income split | €32,750,000 |
| Hotel method | €29,863,636 |
The simple average of the seven results is €32,609,795, a rounded value of €32,600,000. The spread between the lowest and highest result is about 17 %, which is common for an asset of this type.
In practice, I do not adopt an arithmetic average. Methods based on actual accounts (capitalisation, DCF) and comparison, where reliable references exist, carry more weight than multipliers or replacement cost, which serve as checks. The hotel method is useful when accounts are missing or reflect an atypical operator. The weighting adopted is explained in the report.
Further reading
The Business and company shares page describes the method I apply to trading assets. On the same theme, you can read Six hotel management models and Top 10 hotel brands in France.
What next
A business, a hotel or company shares to value?
Sale, contribution, divorce of a business owner, withdrawal of a partner, wealth tax: premises, business and shares valued together, with the consistency banks and the tax authorities expect.
Free quote, by email or by phone. No commitment before the quote is accepted. Fees are never linked to the value of the property (Charte de l’expertise, Title I, §2.1).
