SHA611: Financial Analysis of Hotel Investments

School of Hotel Administration, Cornell University

Tool: Hotel Investment Participants

This chart summarizes the primary and secondary participants involved in a typical hotel
investment project, and it provides their objectives and interests. Use the chart to help
you when you are structuring your own hotel investment projects.

Hotel Investment Description

Participants

Primary Participants: Involved in most aspects of the hotel investment

Owner • Owners contribute the equity to the hotel investment and in

exchange, want to achieve both income and appreciation
returns.
• Owners can include entrepreneurs, institutional investors,
owner-operators, and governments.
• Owners want to operate a competitive hotel in a strong
market; they want influence over the hotel, and they want
the flexibility to sell or refinance the hotel as needed.

Operator/Hotel • Operators manage the hotel on a day-to-day basis. They

Company can be owner-operators, branded operators, or
independent operators.
• Operators earn basic fees for driving revenue and incentive
fees for operating the hotel efficiently.
• Operators are interested in operating a good quality hotel
in a strong market, they want operational discretion, and
desire long-term stability through long-term contracts.

Lender • Lenders provide the majority of the capital to finance the

hotel investment. They can include commercial banks,
conduit lenders, investment banks, credit companies, and
insurance companies.
• Lenders want an adequate risk-adjusted return on their
investment.
• Lenders require that hotel cash flows are greater than debt
service and that the value of the property is significantly
greater than the loan amount.

Specialists: Involved in the purchase and construction of the hotel

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 SHA611: Financial Analysis of Hotel Investments
School of Hotel Administration, Cornell University

Brokers • The sales broker facilitates the sale of the property and
add value by knowing who might be a likely buyer.

• Investment or mortgage bankers facilitate the financing of

the investment and add value by knowing who has money
to lend.

Consultant or • The consultant/appraiser performs the market analysis of

Appraiser the proposed property and estimates its value to help
potential lenders better understand the level of risk.

Legal service • The legal service provider facilitates the many necessary
provider transactions, including land purchase, management
contracts, loan documents, and construction contracts.

Architects and • Architects and designers help achieve the owner's vision
Designers for the property, designing a physical structure consistent
with the owner's concept.

Governments • Government agencies, especially tourism ministries,

facilitate the development and redevelopment of hotels.

• Local, state or provincial, and national governments

exercise a regulatory role in ensuring coherent and
consistent development policy of tourism, meeting and
convention facilities, and transportation services.

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© 2016 eCornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners.