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The purpose of this paper is to fill an existing gap in the field. A transaction-based hotel price index for Europe is constructed to provide a true measure for hotel real estate performance. The index will enable investors enhance investment decisions in many ways: to assess individual property performance; to make an objective decision about where to invest and in which property type; to assess the relative performance of hotel assets to all other sectors and consequently reach optimal funds allocation decisions. This will allow investors to time their acquisitions/disposals according to the hotel property cycle.

Data include 495 hotel property transactions in Europe during the period between 2004 and 2013. Transaction prices and property characteristics were collected from a variety sources published by hotel agents and consultants, property magazines, newspapers, tourist board, individual property and hotel association registers and web sites. Data include property name, sale price, size, time of sale, location, buyers and sellers. A hedonic pricing model is developed where the transaction price is regressed on the different characteristics. The index is calculated by taking the anti-logs of regression coefficients of the year index.

This paper claims that the hotel property price index (HPPI) portrays a more realistic picture of what happened to hotel property prices in 2008 showing a single digit negative growth vs the hotel valuation index which reports a double digit negative growth rate in European hotel prices during the same year. The real impact of recession showed on hotel property prices in 2009. HPPI shows a crash in hotel property prices by -23.7 per cent in 2009. The year 2011 was marked by more sales transacted through administrators and a looming double-dip recession. Unlike appraisal-based indices, HPPI does not suffer from sticky valuation issues and is not desensitise from distressed properties. Therefore, it was more volatile to distressed situations throughout the period between 2011 and 2013.

Results of this study should be considered with caution. There are limitations associated with transaction data including incompleteness or inaccuracies regarding price data, financing information for each deal, property tenure, and property characteristics.

This work has successfully developed an HPPI for hotel property in Europe. This paper paves the way for transaction-based indices that are more volatile than existing appraisal-based indices. This represents a significant development in tracking price movements of hotel properties in Europe. The index has potential to support research and forecasting of the hotel property cycles.

This paper fulfils an identified need to track hotel property prices and timing the hotel property cycle.

The purpose of this paper is to establish whether a terminal value is a substantial amount of the final figure in a hotel’s valuation. Malta’s scenario has been delved into. This due to the fact that owing to Malta’s high population density and its restrictive land area, land values attract a high premium as compared with larger developed countries. Other matters such as earnings’ multipliers derived from a cap rate (initial yield), CAPEX has also been delved into.

The methodologies adopted in hotel valuation practice has been delved into. An extensive literature review is undertaken to analyse the earnings multiplier adopted by various authors over the past 30-year period. The hotel cap rate (initial yield) has been compared with similar yields adopted in the institutional and property markets and then compares to market-based data. A discussion is undertaken on the validity of adopting discounted cash flow, as against the short cut market appraisal approach. Capitalization rates, cap rates have also been referred to as obtained from the academic and practitioners field and compared. Depreciation and the anticipated annual accommodation charges have been analysed. A database of hotel rooms value over the past 20-year period has been referred.

A table outlines the earnings’ multipliers in perpetuity or for the limited expected design life for various cap rates. This data will act as a guide in guiding practitioners to establish an earnings’ multiplier to be applied in their valuation methodology. An example in the Appendix clarifies the manner in which this data table is to be utilized. The finding of this example notes that for this hotel in Malta, as constructed on private land, the terminal value for this development hovers around the 30 per cent of the market value.

This analysis is based on five valuations as undertaken on five hotels in Malta with classification grades varying from III to V. This notes that the terminal value varies within a range of 9-45 per cent of the total value. This analysis has to be undertaken for other countries for a global range of land terminal values percentages to be established.

Establishing the terminal value of a hotel business, will offer greater security for secured lending facilities required. It will further act as an important tool to establish the feasibility of a hotel development.

Updated insight is given to existing hotel valuation methodologies by delving into the workings of the earnings’ multiplier and establishes that in today’s market the terminal value of the hotel basis has to be accounted for. The above findings are based on a link between theory and practice.

The significance of private equity as a form of financing and investing has led to growing interest in the real estate economy over the past few years. Anglo‐American investors in particular are currently engaged in large‐scale real estate transactions and have now become the most important group of investors in the European hotel real estate market. However, for private equity funds, the high risk of investing in complex tourism and specialized real estate such as hotels is always coupled with an expectation of returns well above the market average. Yet actually achieving above market returns is not always accomplished. This paper therefore deals with the question of why some real estate private equity investors succeed in getting returns above the total market average even in the overall bear Western European market environment while others fail to do so. It shows that one formula for success includes deliberately exploiting market imperfections und overcoming inefficient information policies.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.