ExcelsiorAsset Management & Advisory

ExpertiseAsset Management

School AM · Asset Management

An operator-run hotel earns what its owner checks.

The operator runs the house. The asset manager makes sure it is run for the owner’s return: the accounts read every month, the budget challenged, the agreement enforced, capital spent on a payback, and the hold-or-sell question asked every year.

1 · What we do for you

We sit on the owner’s side of the table, every month, for as long as you hold.

Standing asset management

Monthly reading of the accounts, a one-page owner’s report, budget challenge, capital oversight and tracking of the operator’s obligations.

Agreements and operator search

Management, lease and franchise terms compared like for like; negotiation of fees, performance test, approval rights, term and exit.

Transactions and valuation

Feasibility and valuation on USALI lines, investment memoranda, and support through purchase, sale or refinancing.

Expert services

Independent opinions for lenders, investors, boards and tribunals: due diligence, lender’s monitoring, second opinions and expert evidence.

One asset, fixed scope

The Owner’s Review

We read the accounts, the agreement, the market position and the capital plan of one hotel. You receive a written reading and a ranked list of actions. Most owners start here.

Retained, monthly

Standing Mandate

We act as your asset manager through the full cycle: monthly review, budget, capital plan, agreement compliance, and the annual hold or sell question.

One defined piece of work

Project Mandate

A transaction, an operator search, an agreement, a pre-opening, a restaurant concept or a standards programme. Scope, timetable and fee are agreed in writing before work begins.

2 · What we know

Twelve questions owners ask, each answered with its conclusion first.

AM-01

Why an owner needs an asset manager

“My hotel is run by a global brand. Why do I need anyone else?”

The agreement pays the operator on revenue and the owner on profit. Someone has to sit on the owner’s side of that gap every month, and the operator cannot.

6 min
AM-02

Reading the accounts

“What should I look at first in the monthly statements?”

Flow-through. When revenue rises, at least half of the increase should reach gross operating profit. USALI makes that comparison possible; it is the start of the work, not the work.

9 min
AM-03

The budget and the business plan

“The operator has sent next year’s budget. How do I challenge it?”

Rebuild revenue from rooms, rate and mix, then test every cost line against volume. Approve a budget only when each line has a driver and an owner’s question answered.

8 min
AM-04

Benchmarking and the competitive set

“Our RevPAR index is above 100. Are we doing well?”

You are winning share. Whether you are making money is a separate question, answered by GOP per available room against hotels of the same tier.

7 min
AM-05

Forecasting

“Why does the forecast keep changing?”

It should. A forecast that never moves is a budget in disguise. Read the 90 days ahead against the same point last year, every month.

6 min
AM-06

Control and the management agreement

“Where does my power sit in the agreement?”

In three clauses: the approval rights over budget and key appointments, the performance test, and termination. Read them before you need them.

12 min
AM-07

Data rights and reporting

“The operator says the data belongs to the brand. Is that right?”

Only if the agreement says so. Without the hotel’s own guest, channel and ledger data, the asset cannot be managed or sold well. Write data rights into the contract.

7 min
AM-08

Capital, reserves and the conflict ladder

“The operator wants a renovation. How do I decide?”

Every project needs a return and a payback, measured against doing nothing. Disagreements climb a set ladder, from the monthly meeting to the owners’ board; they seldom need to reach a tribunal.

10 min
AM-09

Strategy: hold or sell

“How do I know when to sell?”

Ask the question every year, on numbers: the value to you of holding, against the price a buyer would pay today. The decision should come before the market forces it.

8 min
AM-10

The capital stack and exit

“How much debt can a hotel carry?”

Less than an office building. Above 60 to 70 percent of value, an ordinary bad year can breach the covenants. Structure the debt for the downturn, not the forecast.

9 min
AM-11

Hotel valuation

“What is my hotel worth?”

For a stabilised hotel, one year of income after fees and the reserve, capitalised at a market rate. For any other, five years of projected EBITDA plus a sale at a multiple of year-six EBITDA, discounted to today. Price per key and replacement cost are checks, never substitutes.

11 min
AM-12

The cycle of a mandate

“What does an asset manager actually do across a year?”

A monthly rhythm of close, read, meet and forecast; a quarterly check of capital and obligations; an annual budget, capital plan, valuation and the hold-or-sell question.

7 min

Exhibit 2 · The life of a hotel investment has seven stages, and the owner’s question changes at each

Module AM-12
StageThe owner’s questionWhat the owner holds at the end
01 UnderwriteShould I buy or build this, and at what price?An underwriting memorandum your committee and lender can rely on.
02 StructureWho should run it, and on what terms?A signed agreement you can enforce.
03 BuildWill the building earn what the model assumed?A design brief and a cost plan tied to the underwriting.
04 OpenWill it open on time, on budget and to standard?An opening date that holds, and a hotel that trades from the first night.
05 OperateIs the hotel earning what it should, this month?A one-page owner’s report every month, and an action log with names and dates.
06 ReinvestWhat should I spend, on what, and when?A capital plan in which every project has a reason and a payback.
07 Hold or exitIs this asset worth more to me, or to a buyer?A decision made on numbers, at a time of your choosing.
Source: Excelsior Asset Management Manual, Edition II.

Exhibit 3 · The twelve laws of hotel investment, as the house teaches them

Module AM-01
  1. Hotels are not a long-term hold.
  2. Never fall in love with the real estate.
  3. Location is, and always will be, paramount.
  4. Leave some chips on the table.
  5. You make money on the buy, not the sell.
  6. Cap rates are a derivative of value.
  7. Above 60 to 70 percent loan-to-value is high risk for hotels.
  8. There is always irrational capital.
  9. Beware underwriting that assumes the future will be kind.
  10. Replacement cost is an unreliable guide.
  11. Fundamentals are not a proxy for value.
  12. Barriers to entry are only a speed bump.

3 · What you can use

Three checks an owner can run tonight. The figures stay on your screen.

Exhibit 4 · A cap rate is derived four ways and reconciled. It is never assumed.

Module AM-11 · Method
MethodWorkingUse it whenIts weakness
Market extractionNOI ÷ sale price, from comparable salesThere are recent sales of hotels of the same tier and marketFew hotel sales in India, and disclosed prices rarely state the NOI they bought
Gordon growthDiscount rate − long-term growth (r − g)The hotel is stabilised and income can grow steadily for everSmall changes in g move value a great deal; wrong for a hotel still ramping up
Band of investmentLTV × mortgage constant + (1 − LTV) × equity dividend rateThe buyer will finance the purchase; tests what the capital stack can payAt Indian interest rates it runs high, because the mortgage constant is high
Debt coverageDSCR × mortgage constant × LTVA lender’s view: the lowest yield the bank will fundA floor, not a market price
NOI is income after base and incentive fees and the FF&E reserve. Mortgage constant = annual debt service ÷ loan. Weight the methods by the quality of their evidence; market extraction leads when good sales exist.

Does Gordon’s perpetuity growth apply to hotels?

Yes, at the right moment and in the right place. It applies in two places: the value of a stabilised hotel, and the sale value at the end of a projection. An exit multiple and Gordon are the same thing written two ways: a multiple of 11× year-six EBITDA is a 9.1% exit cap rate, and Gordon says that equals r − g. At a 13% discount rate, 11× implies income growing 3.9% a year for ever.

It does not apply to a hotel that is still ramping up, being repositioned or awaiting a renovation, because its income is not on a steady path. Project those years explicitly, then apply Gordon only once the hotel is stable. That is why the valuation below runs five years first.

Three disciplines keep it honest. Use income after the FF&E reserve, because a hotel must keep spending to keep earning. Keep g at or below long-run inflation, since a hotel ages and its rate cannot outgrow the market for ever. And add a margin to the exit cap rate over today’s, usually a quarter to half a point, because the buyer in year five is buying an older building.

Why not a P/E ratio?

P/E prices a company’s shares. It is struck after interest, depreciation and tax, so the same hotel shows a different P/E under different debt, accounting and tax. An asset is valued before all three, on EBITDA or NOI, which is why hotels trade on an EBITDA multiple or a cap rate.

P/E still has a use, as a cross-check. Listed hotel companies show what the market pays for hotel earnings. Their enterprise value to EBITDA is the comparable measure, not P/E. Even that sits above a single hotel’s value, because a listed company carries management fees, a pipeline, a brand and shares that can be sold in a day. Treat a listed multiple as the ceiling for one asset, never as its price.

AM-11 · Tool

Cap Rate Builder

Derive the rate four ways, weight them by the quality of your evidence, and carry the result into the Snapshot. Example figures.

Market extraction

Gordon growth

Band of investment and debt coverage

Weights

MethodWorkingCap rateWeight
Reconciled cap rate
—
Spread of the methods
—

AM-11 · Tool

Valuation Snapshot

For a stabilised hotel only: one year of income, capitalised. Amounts in ₹ crore. Example figures. For a hotel still ramping up, use the five-year valuation below.

Value
—
Per key
—
Loan to value
—
Debt service cover
—
Cap rateValueLoan to value

AM-11 · Tool

Five-Year Valuation

For a hotel not yet stabilised. Project EBITDA for five years, sell at the end of year five on a multiple of year-six EBITDA, and discount everything to today. Use EBITDA after fees and the FF&E reserve. Amounts in ₹ crore; example figures.

Value today
—
Per key
—
Share from the sale
—
Implied exit cap rate
—
Implied growth for ever
—
Gordon check: discount rate − exit cap
Gordon exit, same growth
—
Year-6 EBITDA ÷ (r − g), net of sale costs
YearEBITDASale, netPresent value

Exhibit 5 · The VAS System of Valuation: six lenses, one reconciled value

Module AM-11 · Method
LensHotelRestaurantWhat it tells the owner
I · IncomeStabilised: NOI ÷ cap rate. Otherwise five years of EBITDA plus a year-five sale at a multiple of year-six EBITDA, discountedEBITDA over the years left on the lease, discounted. A value at the end only if the lease is likely to be renewedWhat the business earns. The lead lens
II · MarketComparable sales: price per key, and EV ÷ EBITDA of the transaction. Listed companies’ EV ÷ EBITDA as a ceilingComparable sales of restaurant businesses as a multiple of EBITDAWhat buyers have actually paid
III · ReplacementLand, plus construction, FF&E and pre-opening at today’s cost, less wear, plus the interest carried while buildingFit-out and equipment at today’s cost, less wear, plus pre-openingWhat it would cost to build the same thing today
IV · Permission and timeThe approvals, the years of building and ramp-up a newcomer must wait through, and the risk the permission is refusedThe licences (liquor, FSSAI, fire, health and trade) and the months to obtain them, fit out and openWhy a permitted, open, trading business is worth more than its bricks
V · VitalityNet Promoter Score, occupancy as capacity used, RevPAR index, three-year against five-year growth, years since the last renovationNet Promoter Score, seat occupancy, sales per seat against peers, three-year against five-year growth, years since launch or refitWhere in its life the asset is being bought, and whether its best years are behind it. Priced as a risk premium on the discount rate
VI · Fit and freedomWhat the buyer means to do with it, and whether the management contract allows it: years left, termination on sale, the fee to end itWhat the buyer means to do with it, and whether the lease and the landlord allow itThe value of the buyer’s plan, kept apart from the price. The seller is never paid for the buyer’s idea
The test beneath all sixHighest and best use: is a hotel the most valuable thing this land and building can be? TRevPAR and NOI per square foot against the rent a retail or office tenant would payThe same, against a shop, café or office on the frontageWhether to keep the use, blend it, or change it
The mixOn a larger site: how much hotel, apartments, retail, conference, offices, F&B, club, spa and parking. Each square foot valued in its own currency, floors and ceilings respected, read as the land value it supportsA restaurant inside a mixed-use scheme is valued as one of its operated usesThe combination that gives the land its highest value
Reconciliation: weight each lens by the quality of its evidence. Income leads; Market corroborates; Replacement with Permission and time sets the ceiling a rational buyer would pay before choosing to build instead. Feasibility work for a new project never assumes a cost of land; valuing an existing asset does, because the owner holds it.

Why permission has a price

A hotel that is open has already crossed the slowest part of its life. Land conversion, building approval, environmental and heritage clearances, fire, liquor and trade licences: in India these can take years, and some are refused outright. Then come the years of construction and the years of ramp-up before the income settles.

A buyer who chooses to build instead of buying gives up the income of all those years and carries the risk that the permission never comes. That foregone income and that risk are real value, and they belong to the owner of the trading asset. The VAS system measures them and states them as a separate line, so the owner can see what the paperwork alone is worth.

Are you buying the peak?

Two hotels with the same EBITDA can be worth very different sums. One is still climbing; the other has filled every room it can, its growth is slowing and its guests are cooling. The numbers in the accounts look the same. The future does not.

Lens V reads five signs. Occupancy shows how much capacity is left: above about 85 percent, growth can only come from rate. Three-year growth below five-year growth means the curve is bending. A RevPAR index below 100 and a falling Net Promoter Score mean the market is turning away. Ten years after a renovation, the next one is a cost the buyer inherits. Together they place the asset on its life cycle, and the VAS system prices the answer as a premium on the discount rate. A hotel bought late in maturity is bought on the downgrade, and the price should say so.

VAS · Lens V

Vitality Test

Where the asset sits on its life cycle, scored out of 100 and priced as a risk premium. The premium flows into the VAS valuation below. Example figures.

The asset

Revenue, ₹ crore, oldest first

Market

Five-year growth (CAGR)
—
Three-year growth (CAGR)
—
Vitality score
—
Risk premium
—
Added to the discount rate
SignReadingPoints

VAS · Hotel

VAS Hotel Valuation

The income lens comes from the Five-Year Valuation above, with the same EBITDA, keys and discount rate. Enter the market and replacement evidence here. Amounts in ₹ crore; example figures.

II · Market

III · Replacement

IV · Permission and time

Weights

LensWorkingValue
VAS value
—
Per key
—
Range across lenses
—
Worth of permission and time
—
Included in the replacement ceiling

The biggest test: what will you do with it?

Every valuation so far prices the hotel as it is. The buyer’s question is different: what do I want this hotel to become, and can I get there? A buyer may want to reposition it up a tier, change the brand, add rooms, or fold it into a collection. Each plan has a value. But the plan is the buyer’s, so its value belongs to the buyer and must never be added to the price.

The management contract decides whether the plan is possible at all. A long contract with no right to terminate on sale freezes the hotel in its present form until expiry. A contract that can be ended for a fee turns the plan into a cost. The VAS system values the hotel encumbered and unencumbered, measures the plan by the faster of the two routes, and sets the price at the encumbered value. You make money on the buy.

When the owner falls and the operator stays

Owners fail; operators often do not. A hotel is sold in distress or taken by its lender, and the brand carries on as if nothing happened. That is by design. The operator asked for it at signing: a clause binding successors and assigns, no right to terminate on sale, and a non-disturbance or tripartite agreement with the lender that keeps the contract alive even through a default.

For the operator this protection is part of what the contract is worth. For the buyer it is the opposite: a hotel bought cheap from a failed owner may still carry fifteen years of someone else’s contract. Value it encumbered unless the papers say otherwise, and read the lender’s agreement before the purchase agreement. For an owner signing today, the protection should be traded, never given: a performance test the operator must pass to keep it, and a right to terminate on sale at a stated, declining fee.

VAS · Lens VI

Fit and Freedom

Your plan for the hotel, and what the contract allows. Reads the as-is value and stabilised EBITDA from the VAS Hotel Valuation and the Five-Year Valuation. ₹ crore; example figures.

Your plan

The management contract

Fit with your scheme of things

As is, encumbered
—
The VAS value: the price ceiling
With your plan
—
Your plan is worth
—
Fit
—
RouteWorkingValue of the plan

VAS · Restaurant

VAS Restaurant Valuation

A restaurant on a lease is worth its earnings for the years it can trade, plus what it would cost and how long it would take to open again. Amounts in ₹ crore; example figures.

I · Income

II · Market

III · Replacement

IV · Permission and time

Weights

LensWorkingValue
VAS value
—
Times EBITDA
—
Range across lenses
—
Worth of permission and time
—

Exhibit 6 · A management or franchise contract is an asset for the operator and a cost for the owner. Value it from both chairs.

Modules AM-06 and AM-11 · Method
QuestionWorkingWho asks it
What is the contract worth to the operator?Fees over the remaining term (base, incentive, system and brand charges), less the operator’s own cost of serving the hotel, discounted at the operator’s cost of capitalThe operator, the owner negotiating a termination, a buyer of the operator
What is a fair residual or termination value?The same present value for the years that remain, plus any unamortised key money the operator would claw back. Compare it with the multiple of trailing fees the contract demandsAn owner who wants out, a buyer who wants the hotel unencumbered
What does the brand earn the owner?The extra revenue the brand brings, times the share that reaches profit, less every fee paid to the brand, discounted at the owner’s rateAn owner choosing between independence, a franchise and a management contract
Is the key money a good deal?From the operator’s chair: IRR, NPV at its hurdle, profitability index and payback on the key money against the net fees. From the owner’s chair: key money is a discount on fees, paid in advanceBoth, before signing
Does the contract survive a sale or a default?Read the assignment, sale and foreclosure clauses, and any non-disturbance or tripartite agreement the operator signed with the lender. Where they protect the operator, the contract passes to the next owner untouchedA buyer of a distressed hotel, a lender, an owner refinancing
Sources: the Excelsior papers Hotel Agreements 101 and Operator Fee Structures 101; the franchise and management-contract appraisal method in the Cornell hotel real estate control course. Operator margins on fees vary widely; use the operator’s own disclosures where they exist.
AM-06 · Tool

Contract Valuation and Key Money

The contract from the operator’s chair and the owner’s. ₹ crore; example figures. For a franchise, set the incentive fee to zero and put royalty, marketing, reservation and loyalty charges in system fees.

The hotel

The contract

The operator

The owner

The operator’s chair

Contract value to the operator
—
Net fees, remaining term
IRR on the key money
—
NPV at the hurdle
—
Profitability index · payback
—

Fair residual value

Fair termination value
—
What the clause demands
—

The owner’s chair

NPV of the brand to the owner
—
Fees as share of GOP
—
YearRevenueFeesOperator’s netOwner’s brand gain

Highest and best use: should it be a hotel at all?

Every valuation rests on a quiet assumption, that the building should stay what it is. Valuers test it with four questions, in order. Is the other use legally permitted? Is it physically possible in this building? Does it pay? And of the uses that pass, which gives the most value?

A hotel earns its income every night, from guests, with a payroll, a brand and an operator in between. A luxury shop on the same frontage pays rent under a lease, and the tenant carries the trading risk. Rent is steadier, so investors capitalise it at a lower rate, and the same rupee of income is worth more. Against that, the owner gives up the hotel’s upside, depends on one tenant, and must check whether the land use and any hotel concession on floor area allow the change. Most often the answer is a blend: the hotel keeps the rooms and gives its street frontage to retail. TRevPAR per square foot and the TRevPAR index show whether the hotel is earning its space.

VAS · Highest and best use

Hotel or Shop?

The hotel as it stands against handing part or all of its area to a retail tenant on a lease. ₹ crore unless stated; example figures, not market rents.

The hotel

The retail alternative

Hotel NOI per sq ft
—
Retail NOI per sq ft
—
Per sq ft converted, a year
Value as a hotel
—
Value, hotel plus retail
—
LineHotel onlyHotel plus retail

The mixed-use question: how much of what?

On a large site the hotel is rarely the whole answer, and seldom the most profitable square foot. Each use earns differently. Apartments are sold once and fund the build. Shops and offices are leased and pay steady rent. The hotel, the banqueting, the restaurants, the club and the spa are operated and earn only as well as they are run. The car park is a by-product of all the others.

The VAS allocation works in five steps. First, the buildable area: site times the floor area ratio. Second, a floor and a ceiling for each use. The floor is strategic (the hotel that gives the place its name, the spa a luxury hotel cannot do without). The ceiling is what the market can absorb. Third, each square foot is valued in its own currency: sale price for what is sold, income capitalised at its own rate for what is leased or operated, less the cost to build it. Fourth, the floors are met, then the space goes to the use with the highest value per square foot until its ceiling, then the next. Fifth, parking is sized from the mix, and the result is read as a residual: what the land is worth under that mix, after the developer’s return. No land cost is assumed; the land value is the answer.

The hotel often comes last on margin and first on meaning. Its brand lifts the price of every apartment beside it, its restaurants draw people to the shops, and it turns a building into an address. The branded-residence premium below carries that into the numbers.

VAS · Development · Mixed use

Mixed-Use Allocation

How much apartment, hotel, retail, conference, office, F&B, club, spa and car park the site should carry. Rupees per square foot of built area; example figures for a luxury metro site, not market data. For sold uses, income is the sale price and margin is the share kept after selling costs.

UseFloor %Ceiling %Income or price ₹/sq ftMargin %Cap rate %Build ₹/sq ftBays per 1,000 sq ft
Hotel
Operated
Branded apartments
Sold
—
Retail
Leased
Conference and banqueting
Operated
Offices
Leased
F&B destination
Operated
Members’ club
Operated
Wellness and spa
Operated
Buildable area
—
Gross development value
—
Land value under this mix
—
Car park
—
RankUseValue less cost ₹/sq ftShareSq ftValueCost
Value from sales
—
Earned once, at launch
Value from leases
—
Contracted, tenant carries the risk
Value from operations
—
Earned nightly, owner carries the risk

AM-06 · Tool

Fee Check

What the operator earns, and what reaches you. Amounts in ₹ crore for one year. Example figures.

Base fee
—
Incentive fee
—
Fees as share of GOP
—
Left for the owner
—
Before rent, tax, insurance and debt

AM-02 · Tool

Flow-through Check

How much of the change in revenue reached profit. Any currency; example figures.

Flow-through
—
GOP margin
—

AM · ToolIn preparation

Financial Diagnostic

Fill the USALI summary template with twelve months of figures and drop it on this page. You receive key ratios against the range for your tier, red flags ranked by money at stake, and a one-page reading to print. It runs in your browser and uploads nothing.

To be told when it opens, write to the Desk below.

AM · TemplatesIn preparation

The owner’s workbooks

The one-page owner’s report, the capital and reserve planner, the risk heat map, the covenant monitor and the delegation of authority matrix, as workbooks you can keep.

Each download asks for an email address. Tools on the site never do.

Ask the Desk

Stuck on a number? Ask.

Until the Desk assistant opens, the principal answers personally on WhatsApp. Answers are guidance on method, not advice on a specific asset. Please leave out anything confidential.

Send on WhatsApp Opens WhatsApp with your question

4 · What you can watch

Short films, three minutes each, with the full transcript beside them.

Film 1 · Recording

Flow-through in three minutes

Why half of every new rupee of revenue should reach GOP, and what to ask when it does not.

Film 2 · Recording

How to read a management agreement

The three clauses that hold the owner’s power, and how they interact.

Film 3 · Recording

Valuing a hotel on one page

Net operating income, the cap rate and the checks that keep a valuation honest.

Film 4 · Recording

The monthly owner’s meeting

An agenda that ends in decisions with names and dates.

5 · What you can read

The papers behind the practice.

Paper

Hotel Agreements 101

Management, lease, franchise and hybrid agreements explained for owners.

Read →
Paper

Operator Fee Structures 101

Base, incentive, owner’s priority and how the fee stack moves with performance.

Read →
Paper

Market Segmentation

Segments, sources and the mix that sets a hotel’s rate.

Read →
Tool

The Hospitality Business Model Canvas

The nine blocks, worked for a luxury hotel platform.

Read →
Reference

Answers and glossary

Plain answers to the questions owners ask most, and the terms defined.

Read →
Tools

The Owner’s Desk

Seventeen calculators for owners and managers.

Read →
By request

The Practice Bible

The full doctrine of the practice in eighteen modules.

Request a copy →

Contact

A first conversation is with the principal, in confidence.

Tell us the hotel, the question and the date by which you need an answer. Accounts are read only under a signed non-disclosure agreement.

Emailvikram.singh@excelsiorassetmanagement.com
WhatsApp+91 98733 42567
OfficesNew Delhi · Jaipur