Hotel Appraisal - Fee Simple vs Leased Fee

[Ken B]

Agreed. But I'm talking about a Hampton Inn with no leases encumbering the property. My co-worker, he got his MAI a couple years ago so he's been deep in the AI weeds more recently than I have, is telling me that there is a leased fee interest because hotel guests and the hotel owner have exchanged consideration for use of the property. No weekly or monthly guests/tenants with special leases/agreements, just your run of the mill Hampton Inn. I suspect that a hotel guest does not enjoy the same rights to the property that an apartment or retail renter has and therefore the AI stance on what creates a leased fee interest does not apply to a hotel.

If one was to actually apply this theory to the analysis, the value on a Tuesday at 2 PM could be substantially different from the value at 11PM on a Saturday night. It doesn't work like that.

 

[Thomas Holding]

If one was to actually apply this theory to the analysis, the value on a Tuesday at 2 PM could be substantially different from the value at 11PM on a Saturday night. It doesn't work like that.

Exactly. Someone who has reserved a room in a hotel has no ownership rights because they have not signed an actual lease. What the hotel is providing is more akin to a service. Apartments are different since there is an actual lease attached to a specific unit for specific period of time.

 

[Phil McDonald]

Hotels are fee simple. The fee simple owner does not covey the leasehold stick from the bundle of rights to a hotel GUEST. The right must be conveyed in order to create the leased fee. When making a hotel reservation that right is not conveyed. Instead the hotel often reserves the right to cancel a reservation or provide alternative accomodations in the event that a hotel is over sold. Absolutely no property right is conveyed to a hotel guest and the owner retains his full bundle of fee simple sticks. A hotel reservation is a service agreement. Plus we all know there is no right to quite and peaceful enjoyment when housekeeping comes barging in at 7:00 AM.