What a going-concern appraisal captures
A going-concern appraisal values the hotel as an operating business, including real estate, FF&E, brand affiliation, workforce in place, and licenses/permits — essentially the value of everything needed to operate the hotel and generate its income stream. This is the standard appraisal type for most hotel financing, since it reflects what a buyer would actually pay for the operating asset.
What a real-estate-only appraisal captures
A real-estate-only appraisal isolates the value of just the land and building, often as if leased at a market rent to a hypothetical hotel operator, excluding the value attributable to the business enterprise, brand, and FF&E. This figure is typically lower than going-concern value and is used less often for primary financing, though it can be relevant for specific accounting, insurance, or tax purposes.
Why the difference matters for your loan amount
Because most lenders apply LTV against going-concern value, and going-concern value is typically higher than real-estate-only value, using the wrong figure in your own back-of-envelope calculations can significantly overstate or understate your expected loan proceeds. Always confirm with your lender which appraisal basis they'll use before estimating your financing outcome.
The three approaches within a going-concern appraisal
A hotel going-concern appraisal typically reconciles three valuation approaches:
- Income approach: capitalizing stabilized NOI at a market cap rate — usually given the most weight for income-producing hotels
- Sales comparison approach: analyzing comparable hotel transactions, adjusted for flag, age, and market
- Cost approach: estimating replacement cost less depreciation — generally given less weight for older, stabilized assets
How to prepare for a hotel appraisal
Providing the appraiser with clean, complete trailing financials, a current STR competitive set report, franchise agreement details, and a summary of any recent capital improvements helps ensure the appraisal accurately reflects the property's current performance and market position, rather than relying on incomplete data that could understate value.
Frequently asked questions
- Which appraisal type do lenders use for hotel financing?
- Most hotel lenders require and lend against a going-concern appraisal, which captures the full operating business value including real estate, FF&E, and brand affiliation, rather than a real-estate-only valuation.
- Why is going-concern value usually higher than real-estate-only value?
- Because it captures additional value components — the operating business, brand affiliation, FF&E, and workforce in place — beyond just the land and building.
- How long does a hotel going-concern appraisal take?
- Typically 3-5 weeks depending on the appraiser's workload and how quickly complete financial and operating data is provided, making it one of the longer lead items in a hotel financing timeline.
Talk to a Toronto hotel financing specialist
We arrange hotel, motel and resort debt across Toronto, the GTA and Ontario — acquisitions, refinancing, construction and PIP capital, and short-term bridge loans — through banks, credit unions, secondary institutional and private lenders.