Valuing tourist residences: a tourist residence is not a hotel

Recently, certain valuations and court decisions have tended to apply to tourist residences the same valuation criteria as those used for traditional hotel businesses, particularly with regard to eviction compensation. This practice gives rise to serious reservations. A telling example: the judgment of the Tribunal Judiciaire (Judicial Court) of Albertville of 21 April 2023, upholding principal compensation equivalent to 3 times the annual turnover of the evicted operator.

Yet this approach, however striking, rests on a fundamental error of equating the two. It ignores the deep structural differences between these two operating models. In terms of profitability, reliance on services, occupancy rate or average length of stay, a tourist residence bears no comparison with a hotel.

• Gross margin (EBITDA/turnover): 30% to 45% for a conventional hotel, 20% to 35% for a tourist residence
• Net margin (net profit/turnover): 10% to 20% compared with 5% to 12%
• Average occupancy rate (France): 65% to 80% compared with 50% to 70%
• Average nightly rate: €90 to €140 compared with €60 to €100
• Average length of stay: 1 to 2 nights compared with 3 to 7 nights
• Reliance on ancillary services: high for hotels (catering, conferences), moderate for residences (cleaning, linen)

These differences clearly show that the cash flows generated by a tourist residence are markedly lower than those of a conventional hotel. Consequently, applying identical turnover multiples is economically inconsistent and legally open to challenge.

A recent example provides a credible illustration: the acquisition by Compagnie des Alpes of a 33% stake in Terrésens, a major operator of mountain hotel residences. This €6.9 million transaction values Terrésens at 0.3x its turnover, which reflects a reasonable level of prudence based on tangible economic benchmarks.

This multiple is also in line with the valuation of the sector’s only listed player, Pierre & Vacances, valued at 0.35x projected 2026 turnover.

The valuation of a business (goodwill) must be based on a rigorous approach, giving priority to discounted future cash flows (DCF), rather than on approximations using turnover multiples disconnected from operational reality.

A tourist residence is roughly half as profitable as a hotel. It is therefore economically unfounded to use the same multiples to determine eviction compensation. Courts and valuers must remain vigilant to avoid any damaging overvaluation in commercial disputes: tourist residences, as assets with more modest returns, call for a differentiated, contextualised and economically justified approach.