A hotel’s value isn’t necessarily limited to the EBITDA it produces. The hard part is figuring out how much of tomorrow’s growth belongs in today’s price.

Here’s a textbook case of the weakest growth story. Let’s say you have a hotel that’s been open for 20 years, and performance has been fair to middling for all that time. During that period, ownership has tried every trick in the book to improve it: changing management, chasing new revenue streams, bringing in fancy GMs, hiring marketing companies, and all the rest. Now they say a new owner could make it soar. Yeah, right. You want somebody to pay for upside that you yourself haven’t been able to capture. Maybe that’s because it can’t be captured at all, and that’s how every serious allocator will look at it.

At the opposite end of the spectrum is the genuine passion asset. Say you have a wealthy owner who built an extraordinary hotel simply because she loved the place, and she never particularly cared about squeezing every dollar out of it. Rate hasn’t been pushed, distribution has never been optimized, and nobody spent much time trying to fill every room. For this kind of owner, interacting with guests is its own reward, particularly when those guests appreciate the masterpiece that she’s built. A buyer can look at that and see money the owner simply never went after.

Those two hotels can look remarkably similar on paper. Both may be beautiful, founder-driven properties with years of history and mediocre financial performance. But one owner has spent decades trying to improve the numbers and failed. The other barely tried. That difference can be worth a fortune.

Then there’s growth that’s already been partly proven. Say the hotel is running at 80% occupancy and selling out in high season, and management can show how much business it’s turning away. If permits are already in hand for additional keys, the buyer isn’t starting from a blank sheet of paper. The demand has already been proven and part of the hard work has already been done. That deserves value.

The price should reflect who still has to do the work. If the next owner has to supply years of capital, execution and risk, she deserves the upside that comes with it. If the seller already did most of that work, giving the growth away for nothing is stupid.

How do you put a price on future growth? Almost every negotiation on this topic comes down to working out how likely that growth really is, how much capital still has to go in, and who supplies that money. When you get to valuation, fantasy deserves zero. But de-risked growth deserves a check.

The buyer shouldn’t pay today for somebody else’s dream. The seller shouldn’t hand over tomorrow’s money after already doing the hard work. Somewhere between those two lies the price.