There are 4 broad categories of hotels:

  1. Inner suburban (beerhouse)
  2. Middle suburban .
  3. Outer suburban
  4. Boutique.


The beehouse is an inner suburban hotel usually located near the waterfront. lt commonly has the following features:

The beerhouse has the least management problems of any hotel as it does not spend a great deal on entertainment or advertising. It can be easily run by a small number of staff and is often the first hotel for publican investor. Because of the ease of management and lack of competition (no new hotels or clubs are likely to open in the immediate area) it is he safest hotel investment and therefore, has the lowest capitalization rate.

The main problems are:

A number of inner city hotels are renovated into boutique hotels or specialty hotels based on entertainment or a good restaurant. For example, in Balmain, Paddington and Glebe.


Typical middle suburban hotels proliferated in the 1920s and 1930s and usually have an "art deco" style. Typical features include:

Middle suburban hotels require a higher level of management expertise compared to beerhouses because of the problems associated with entertainment and the larger number of bars. They are riskier than the beerhouse but there is little chance of increased competition as they are usually sited in established suburbs. The valuer should check the land use for “highest and best use" as the land is often zoned commercial. Because of the higher risk to investment the capitalization rate is higher than that for a beerhouse.


The outer suburban hotel is the largest and most modern of the hotel types and is characterised by:

An investment in an outer suburban hotel is hiqh risk investment because of:


The boutique hotel is largely a function of the “gentrification” of the inner suburbs of the large cities. It is typically an old hotel which have been modernised usually, to a very high standard and cost so that there is little resemblance to the old hotel. They are characterised by the following:

Very good examples are found Balmain and Paddington in Sydney. The risk is much hígher than for other hotels as the success or not depends largely on the fickle tastes of a particular professional class clientele. Their sustainability has not yet been proven.

A further problem is that since the quality of management required is high a large part of value well be personal goodwill. Therefore, the capitalization rate is the highest of the hotels.