Every formal valuation arrives at three numbers: the NOI-multiple value, the DCF value, and the comp-trade value. They almost never agree. The reconciliation — explaining the spread between them and arriving at a single defensible number — is where the valuation analyst earns the fee, and where the seller proves they understand their own asset.
Why the three diverge
Each method measures something slightly different. NOI multiple captures current cash-flow earning power applied to a market-derived multiple. DCF captures projected future cash flows discounted to present value, with a heavy weighting toward terminal value. Comp-trade captures what the market has actually paid for similar assets, with all the messy idiosyncrasies of individual deals.
Typical spread on a stabilized European urban full-service: DCF and NOI multiple within 5-8% of each other, comp-trade within 10-15% of both. If your three methods spread more than 20%, one of them is built wrong, and the reconciliation work is figuring out which one.
Weighting the three
Standard valuation practice weights the methods based on data quality. A common weighting for a stabilized hotel with strong comp data: NOI multiple 40%, DCF 30%, comp-trade 30%. A weighting for a value-add hotel with thin comp data: NOI multiple 30%, DCF 50%, comp-trade 20%. A weighting for a trophy asset where comp-trade is dominant: NOI multiple 30%, DCF 20%, comp-trade 50%.
Argue the weights with the appraiser before they finalize. If you can move the weighting toward the method that produces the highest defensible number for your asset, you have shifted the appraisal by 2-4% without changing any input.
The seller's reconciliation memo
Before the buyer's diligence team sees the three numbers, the seller should write a 2-page reconciliation memo that walks through how the three converge. The memo does three things: states the three values, explains the spread (which method is high, which is low, why), and lands on the recommended valuation with explicit weighting.
This memo becomes the seller's anchoring document in every subsequent valuation conversation. The buyer's team will produce their own numbers, but when they sit down to negotiate they negotiate against your reconciliation memo, not against their own analysis in isolation. The seller who writes the memo first writes the rules of the conversation.
What buyers actually do with the three
In practice, sophisticated institutional buyers (Blackstone, KKR Real Estate, Brookfield, Henderson Park, Archer Hotel Capital) do the DCF for completeness but anchor decisions to NOI multiple with comp-trade as the sanity check. The DCF is the model that goes into the IC paper; the multiple is what they negotiated. Mid-market buyers and family offices skew more toward comp-trade — they want to know what someone else paid recently.
Knowing which buyer is which changes the seller's presentation. To the institutional buyer: lead with NOI multiple and the comp-trade evidence supporting it. To the family office: lead with comparable transactions and let them work out the multiple. To the developer-buyer (rare in stabilized deals): the DCF matters more because they are buying a business plan, not a current cash flow.