An Australian hotel is worth between 5x and 8x EBITDA for most trading businesses, or roughly $100,000 to $350,000 per room depending on location, star rating, and whether you own the land. The range is wide because “hotel” in Australia covers everything from a 10-room coastal motel in Exmouth to a 70-room boutique property in Fitzroy. Applying the same multiple to both would produce a number that means nothing to a serious buyer.
If you own a hotel and you’re thinking about what it’s worth — whether that’s a proper accommodation business, a country pub with rooms, or something in between — here’s how the valuation actually works.
What Are Buyers Actually Buying?
This question matters more than most owners expect, and the answer shapes everything that follows.
When someone buys a hotel, they’re typically buying one of three things:
An income stream. The business generates reliable, recurring cash flow, and the buyer is paying for that stream capitalised at a rate reflecting risk. This applies to most well-run accommodation hotels with a track record of stable occupancy. The buyer cares about EBITDA, and they’re paying a multiple of it.
A property. Some buyers are fundamentally property investors who see the hotel as a commercial real estate play. The trading business is secondary; land and building drive the analysis. This is common with freehold pubs and older hotels in suburban or regional locations where land values have moved significantly.
A platform. Private equity and larger operators sometimes buy hotels as a rollup — they’re acquiring something they plan to improve, reposition, or fold into a portfolio. They may pay above a normal multiple if they see specific operational upside.
For most SME owners with a hotel doing $1M–$20M in revenue, the income stream approach will dominate.
The Three Valuation Methods
No serious buyer relies on just one method. You’ll encounter three, typically applied as cross-checks against each other.
EBITDA Multiple
The standard approach for trading hotels in Australia. Take your earnings before interest, tax, depreciation, and amortisation — adjusted for genuine one-offs and with your salary normalised at market rate — and apply a multiple. Typical ranges:
- Budget motels and country pubs: 3x–5x EBITDA
- Mid-market accommodation hotels (20–60 rooms): 5x–7x EBITDA
- Boutique and premium properties in strong markets: 7x–10x EBITDA
- Institutional or PE-targeted assets: can push above 10x
A well-run coastal motel in Western Australia with stable summer occupancy and a management team that doesn’t evaporate the moment you leave sits comfortably at 5x–6x. Add a freehold title, a packaged liquor licence, and strong repeat bookings, and you’re pushing toward the top. A country pub with an ageing fit-out, run entirely by the owner, where half the regulars are loyal to the publican rather than the venue — that’s 3x to 4x, and only then if there’s a motivated buyer.
Quick sense-check: most mid-tier Australian hotels sell for $150,000–$300,000 per room. Multiply your room count by $200,000 and compare it to your EBITDA multiple estimate. If the two numbers are close, you’re in normal territory. If they’re miles apart, something unusual is happening in either your cost structure or your property value.
Capitalisation Rate
More common when buyers are treating the hotel primarily as a property investment. The formula: divide net operating income by the cap rate to get an implied value. If your hotel produces $800,000 in net operating income and the prevailing cap rate for similar assets in your region is 8%, the implied value is $10 million.
Cap rates for Australian hotels typically run 6%–12%. Lower rates (and therefore higher implied values) apply to premium CBD and major tourist precinct properties; higher rates apply to regional and rural assets where demand is thinner and risk is elevated. Getting NOI right requires stripping out what a professional manager would cost to operate the business — not what the owner actually draws — which is where most back-of-envelope calculations go wrong.
Per-Key Pricing
The bluntest instrument, but useful for quick sanity checks and common in hotel broker conversations. Recent comparable sales in your region will show a price-per-room. Multiply that by your room count. The market tells you whether the result is reasonable.
This method fails for hotels with significant non-room revenue — a property with a busy restaurant, function space, or bar generates income that per-key pricing ignores completely. Use it as a floor check, not a primary method.
The Metrics That Drive Value
Before any buyer makes an offer, they’ll pull your performance data. The numbers they focus on:
Occupancy rate. What percentage of available room nights are you actually selling? Australian hotels in metro areas average around 65%–75%, lower in regional markets. Sustained occupancy above your competitive set is a genuine valuation driver — it tells buyers you have demand, not just capacity.
Average Daily Rate (ADR). What you’re charging per room per night, on average. Rising ADR while maintaining occupancy means pricing power. That combination attracts a premium.
RevPAR. Revenue per available room — occupancy rate multiplied by ADR. A hotel at 70% occupancy with a $180 ADR produces a RevPAR of $126. Benchmark that against comparable properties in your location. Outperform your market and you’ll attract a premium; underperform and buyers will factor in the work required to fix it.
EBITDA margin. What percentage of revenue reaches EBITDA? For well-run hotels, 30%–45% is normal. Below 25% and buyers will question the cost structure. Above 45% and they’ll ask what you’re not spending on maintenance (a fair question).
Understanding how to calculate these figures — and which add-backs are legitimate — is covered in more detail in our guide to EBITDA add-backs when selling a business.
Freehold or Leasehold: It Changes Everything
This is the single biggest valuation lever most hotel owners don’t fully appreciate until they’re mid-sale. (By then, it’s too late to change it — which is why understanding it early matters.)
Freehold means you own the land and building. The business value and the property value combine into a single sale price. Buyers paying for freehold hotels are often deploying property capital alongside business capital — they include SMSF investors, operators who want to lock in their cost base, and some PE firms. The absolute price looks higher, but you’re selling two assets, not one.
Leasehold means you hold a commercial lease. Your value comes entirely from the trading business. A long lease with clear renewal options protects that value; a short lease or an ambiguous renewal clause destroys it. I worked on a sale involving a hotel with excellent trading history — occupancy well above market, strong RevPAR — but only four years left on the lease and a landlord who’d been non-committal about renewal. We spent three months restructuring the lease before we could run a credible process. The business hadn’t changed, but without lease security, buyers couldn’t get finance and didn’t want the risk.
The decision to buy freehold or leasehold also has significant tax implications — the asset sale vs share sale structure affects how the proceeds are taxed, and this is worth sorting out before you go to market. See also our overview of tax on selling a business in Australia.
Pub Hotels vs Accommodation Hotels: The Australian Distinction
In Australia, the word “hotel” has a specific licensing history. Under the old tied-house model, a “hotel” was any licensed premises required to offer accommodation — which is why most Australian pubs are still technically called hotels even if their rooms haven’t been used in decades. That distinction matters enormously at sale.
A freehold tavern with a packaged liquor licence and gaming machine entitlements in suburban Perth is a completely different asset from a 40-room accommodation hotel on the Coral Coast — even if both show similar revenue on paper. The buyer pool diverges, the valuation logic diverges, and in the case of gaming entitlements, you’re selling something that has its own regulatory market value on top of the business.
Make sure whoever is advising you understands which market you’re actually operating in.
What Kills Hotel Value
A few things reliably suppress valuations:
Owner-operator dependency. If the business runs on your relationships — with regulars, local suppliers, or staff who won’t stay without you — buyers price that risk into their offer. The test is simple: could you take three months off without trading deteriorating? If the honest answer is no, you’ve got work to do before a sale.
Deferred maintenance. Hotels age visibly. A tired fit-out, ageing HVAC, and plumbing that’s been limping along aren’t just aesthetic issues — they’re disclosed capital expenditure that buyers will subtract from their offer, usually at a higher cost than it would actually take you to fix them. If you’re planning to sell in the next two or three years, a well-timed refurb typically comes back at a multiple.
Thin or unreliable financials. If your financial records are a mixture of personal and business expenses — or if cash has been handled informally — buyers can’t get finance on the number you want. Three years of clean, verifiable financials are the minimum for a credible process.
Single demand driver. A hotel that fills its rooms because of one employer, one annual event, or one government contract gets a meaningful risk discount. Diversified demand across corporate, leisure, and group bookings tells a much more reassuring story.
Where to Start
The range of outcomes in hotel sales is wider than almost any other business category. A prepared vendor with clean financials, documented operations, a trained management team, and a freehold property in a location with diversified demand — that business attracts multiple offers and clears near the top of the EBITDA range. An unprepared vendor with a short lease, owner-dependent operations, and three years of inconsistent records is negotiating from a position of weakness before the conversation starts.
Start with your EBITDA number, apply the rough multiple for your hotel type, and run the per-key sense-check. The gap between those two figures often tells you something useful about how a buyer will see your asset.
If you’d like a more detailed view of where your hotel sits, use our business valuation calculator or get in touch with the team — we work with accommodation and hospitality businesses across Australia.
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