Key role of estimator

The process of estimation is quite difficult as it need a list of price-determining factors: the object could be as property and as a business in a definite period of time.

Just 3 years ago the hotel market of Ukraine was quite inert against other dynamically developing property. Increasing of the fund of investment companies and integration of the country in European and world community bring the interest of investor and international hotel companies.
In Ukraine the market of hotel business is active developing. Confirmation of it international hotel networks which open their hotels in our country: Rixos – new 5- star hotel for 434 rooms was open in Truskovets in September 2005, Radisson 4-star hotel is in a business center of Kiev, international network of hotels Hyat is planning opening in Kiev to the middle of June 2007, 5-star Hyat.

In a near future the number of foreign hotel networks on the territory as Kiev as Ukraine will increase. That is why the actual question is about estimation of hotels for future selling.

Variety of methods..

In world practice there are three approaches to estimation: profitable, extravagant and method of sales comparative. Choosing one or another approach depends on many factors, first of all from specific of the object, and also situation on the property market in this segment. Method of comparative of sales works better there, where there is large number of recently sold objects, what is the factor of active market.

Comparative approach could be realized by two main methods: method of statistic modeling and method of comparative analyze of deals. Information which is received with help of this approach is full and valid than while using other methods. The complication of such estimation consists of choosing representative analogs.

Estimators use the method of analyze of expends if:

- method of comparative of sales could not use because of lack of data about comparative sales or rent;
- building refers to the object of special purpose, for which it is hard to find comparative objects, what makes this method ineffective;
- object of property is in a stage of projecting.


Cost of working hotel within the limits of property (extravagant) approach, takes into consideration all actives, including ton material which is connecting with brand of the hotel, minus cost of all duties (debts).

Profitable method divides into two approaches: method of straight capitalization and method of money discounting. First let to define the cost of the object with the help of rate of capitalization and operating income of the property. Method of money discounting consists in making money flow and cost of sales to the current cost.

Profitable method in estimation of hotel property gives answers for most important for the owner: what is the potential long-range period. However, estimator could offer the rate of profitable object as a result of its current condition, without any foreseeing changes.

Not only property but also business..

Estimation of hotels has its own specific. First of all it is estimation of the property which is associated with business. Hotel could be estimated as a business in relation to its financing rate. As an object of property it also has cost but alternative rent income usually gives lower estimations.

Hotel project is a bit difficult than developing other property. Except architecture decision, internal planning should be mentioned following: complicated technical structure of the hotel: rooms, restaurants, fitness centers, laundries, shops, parking and etc.

Investments in hotel property are characterized by long term of pay-off period in comparison with investing to other property. Self cost of developing trade or office center is $1000-1100 per 10 sq. ft. Investments in good hotel are more $1200 per 10 sq. ft. Additional expends for equipment for hotel could be 50% from this sum. I should be mentioned that useful square in hotels does not increase 50% what influences on their profitability. Spacious areas are used for additional rooms – laundry, management, room-service and etc.

The main difference hotel from other type of property is planning of building. Building which was constructed for a hotel could not be used for another purpose, as each type of property has its own specification.
Hotels are the classic object so calls “profitable” property, which is the main mean of enterprise, which generate the income.

Hotels refer to those types of property where exploitation of the object closely connects with property. Incomes from restaurants, bars, café, fitness centers and other could be to 30% from all incomes.
Growth of cost and capitalization is too high, so for 8-10 months hotel could grow in price in 2,5-3 times

Do stars need?

The class of the hotel plays not less role whiles its estimation. Pay-off period of the hotel is influences on its cost. The hotel of the lowest level pays-off for a year or two but 4 or 5 stars where huge investments are could not pays-off for 25 years.
Each estimator should use classifier of hotels for estimation. 2 years ago was accepted classifier where are all necessary characteristics. It is almost as European that is why quality of hotels should respond to the world standard. However, very often hotels which were built in Ukraine have stars which are not corresponding to reality.
Classification of hotels – is a relevant notion but there are some quality norms of services and project which help to refer it to some category.

Operators of hotel markets make stardom by their selves and it is always doing not corresponds to international classification.

To whom trust estimation?

According to the law of Ukraine “About estimation of property, property rights and professional estimate work in Ukraine” to the subjects of estimate work refers registered physical persons.
Some companies which offer services in a sphere of commercial property (consulting) are also do estimation. As one of the important moments in the property estimation is legal expertise, then combination of these works positive show on offering services.

In Ukraine there are a quite amount of qualified estimators with good level of knowledge and practice in estimation of properties. You should be attentive in a choice of estimator, as in Ukraine nobody insure professional responsibility of experts. While choosing estimator and insure yourself it is better to go to big companies who could recommended themselves on market and working 7-10 years, and who is in such organizations as Union of land estimators, League of land estimators which could guarantee qualified work of their staff.

So it is not necessary to go to foreign estimators as our estimators keep not only international standards and rules but they use national legislation and better informed with peculiarities of the region.

Leading estimators in regions hold high level of professionalism as they do their job very serious. Errors in estimation are very little what is important for clients. More then in ten years of existence of institute independent estimation Ukrainian specialists have enough experience for estimation this kind of property.

On Ukrainian market there are companies which could qualified estimate this kind of properties: for example, such companies as Castle Development, Solomon Group and also Colliers International, DTZ.

Actually, in Kiev there is a little amount of big contracts of purchase and selling hotels as separate business. Big deal of 2006 was a sale of the hotel “Opera” in Kiev with 138 rooms.

Estimate but not sell..

The purpose of estimation is set not only by client – it could be not only owner but also other interested parties. For example, the owner wants to get hotel in security for but he doe not have enough money for business and he decided to give a hotel in security for bank, in this case estimation is needed. Another situation when owner of the hotel wants to pass international audit to show transparence of his business. In this case the company-audit demands to lead an expert estimation by independent company-estimator. These two ways of estimation are absolutely different, it is different approaches, different objects. In first case the hotel will be estimated as a whole property complex and in second – estimation will be doing element-by-element, so all actives which are in the hotel will be estimated separately, as while selling hotel is estimated also from the point of view the business.
According to states of order of State committee as to questions of technical regulations and customer politics from 1 February 2005 №28 “About confirmation of list of properties which is subject to certification in Ukraine” hotel services must be certificated in Ukraine state system of certification – System certification UKRSEPRO. This certification should be done according to “Rules of certification of hotel services” which are confirmed by order of State standard of Ukraine from 27 January 1999 №37.

Works by confirmation of certification of hotel services is made by agencies of certification which should be accrediting according to the Law of Ukraine “About accreditation by agencies of estimation”.
According to 3.8 Rules of certification hotel services, the category of hotels, motel is determined as classification group which is characterizing by definite list of demands. Category is marked by sign * (star). Number of stars increased with growing level of quality of service. Hotels classified by 5 categories, motels – 4. GOST 28681.4-95 “Tourist servicing. Classification of hotels” establishes appropriate demands to each category.

According to 1.5 Rules of using the hotel and analogue means for giving hotel services using stars as a sign of corresponding the hotel to some category, which is not confirmed in legislative order – forbidden. This confirmation is made by passing special certification procedures by operators of hotel services.