As stated in the preamble, the Direct Comparison Approach is based on the principle of substitution and requires that an assessor compare the sale prices and the attributes of recent hotel/motel transactions with the subject property.

Using the Direct Comparison Approach requires the collection of considerable data and its reliability depends on the availability of sales of similar (comparable) hotels/motels having a similar highest and best use and preferably all in the same geographic area. The same sales used to determine base capitalization rates in the Income Approach are used for analysis in the Direct Comparison Approach.

There are four steps in the Direct Comparison Approach:

• Step one requires assessors to collect and verify necessary information from sales, listings and offers to purchase.
  
  
• Step two requires the assessor to develop common units of comparison.
  
  
• Step three requires the assessor to analyze the subject and the comparable properties and adjust for differences. These differences include property rights conveyed, financing, condition of sale, time, quality, size, location, facilities provided and physical condition (age).
  
  
• Step four requires the assessor to reconcile into a single value or range of values.