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What is the value of the Eiffel Tower?
Let’s tee off by valuing the Eiffel Tower purely from a business perspective. Constructing a probable income statement will help and we can start with revenue. (Please refer to the accounting section to understand this better)
Revenue:
Let’s start with calculating the average price per ticket. If you have been to the Eiffel Tower, you will know the approximate price per ticket but if not - that's ok, you will end up with a guess of anywhere between €10 to €40 at which point the interviewer should help you out. Taking into consideration the knowledge about the approximate prices for sightseeing, we can assume €20 per ticket.
The current the price for a ticket averages €17.5. Assuming approximately 10 ticket counters exist at the tower. We assume that for each one ticket sold at the counter the tower sells 1.5 tickets online.
Assuming the time to issue one ticket is approximately 1 minute (including families), we get 60 tickets per hour. Given that the Eiffel Tower is open to tourists from 9.30 am - 11.00 pm every day, we calculate the revenue per year as 13.5 * (10+15) * 60 * 360 = 7.29m tickets per year (See below). Well that is pretty good math as Paris sees approximately 7m visitors a year.
13.5 = hours
10 = ticket counters
15 = Online tickets for everyone ticket counter
60 = minutes
360 = Number of days in a year
So, annual revenue for 100% occupancy will be 7.29m * €17.5 = €127.6 m
Let's assume 80% occupancy, which gives us more realistic revenue per year €102m.
Expenses:
Let's look at additional expenses and revenues.
€30,000 (salary per year) * 30 (# of employees) = €900,000
Repair & maintenance along with Depreciation costs can be estimated at 2.0% of the value of the tangible asset (Assuming the total steel structure costs £100m). The repair & maintenance with depreciation costs work out to c.€2m.
Ancillary revenues:
Also adding ancillary revenue (gifts, souvenirs and other inside facilities such as shops, restaurants).
Assuming 1 out of 5 people visiting the Eiffel Tower pop into the restaurant and buy some souvenirs, at average revenue per customer of €20 we get we get ~€29m.
So, total revenues would be €102m+€29m = €131m
Cost margins for ancillary revenue would be 50% * €29m = €14.5m
Finally, we can calculate the profit as revenue – costs which is €131m -€2m - €14.5m -€1m = €113.5m
The Eiffel Tower as a cultural monument with stable profitability would be valued at least 20x its net income per year.
= €113.5m * 20x = €2.27bn
So, the value of the Eiffel Tower is approximately €2.3bn.
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