A typical three day convention will be surrounded by four days of set up
and two days of breakdown during which, a convention hotel will enjoy two
days of full occupancy with soft demand during the last day the event and
even lower demand during the combined six days of setup and breakdown.
These booking patterns, along with the high costs associated with expected
amenities such as meeting space, room service, and extended hours for
food service offerings combine to make a difficult business model for most
convention hotels.
The following formula shows the theory behind the income approach
which is a commonly used calculation made by investors to determine the
feasibility of a business venture:
Value = Net Operating Income/Capitalization Rate