How to choose a hotel to buy?

How to choose a hotel to buy?
16 March | 6 min. | Hotel audit and consulting

The transaction and the process of buying a hotel are not much different from the purchase and sale of residential or commercial real estate. However, the subtleties of this business lead to a number of important formalities that are necessary for the right profitable choice.

You might be wondering what is the point of buying a hotel in crisis because the hotel sector has suffered the most. After all, it is true that against the background of the crisis, many owners have lost operators, others had to close down their hotels. In order to recover financially, they are forced to sell their properties, and the deadlines require decreasing the price.

For investors who are ready to wait for the economic recovery, as you know, the crisis is the best time to invest money, as you can find a profitable object.

When investing in the hotel business, take into account, that the most profitable hotels are considered to be 3 and 4-star hotels, they are the most popular consumer demand, they bring the largest revenues, and are the most stable during the recession.

Regardless of the criteria, you set for yourself: the star rating of the hotel, the number of rooms, etc., there are general rules that apply to any hotel.

When choosing a country, city, or place, be sure to take into account the seasonality of the hotel business. City hotels are open all year round. The most important thing for a hotel is its location. A hotel, located in the city center or close to the city center will be the optimal choice. It is applicable to every city and town.

Explore the statistics for the selected region, its popularity, infrastructure development, tourist and passenger traffic in a particular city – these are the factors that you should definitely pay attention to when making a decision.

When choosing a hotel, the first thing you should ask the owner about is the reason for the sale.

Common reasons:

  • Financial problems: insufficient funds to invest in the hotel and maintain it in working order; debts; bankruptcy.
  • The retirement of the owners or the heirs who do not have experience in this field.
  • The division of the company by the owners.

Having accurately determined the reason for the sale at the very beginning, you can immediately understand where the problems may lie, and predict the cost of solving this issue for you.

How to assess the condition of the building, analyze whether repairs will be required, whether structural changes will be needed, the degree of deterioration of elevators and electrics, fire condition, etc.

During the inspection, arm yourself with the cadastral plans and the technical inspection sheet. Note everything that you should pay attention to. This will help you make the calculation of additional investments.

Looking around the room, you can use simple techniques to detect problems that are hidden inside the walls: open the taps with water, look at the water pressure. Check the wiring condition: connect the phone charger to the power outlets. Open windows, doors yourself, check the locks.

Be sure to inspect the technical units and equipment, year of manufacture, service life, and replacement time. Check the cadastral plans with the current location of the walls for compliance.

Look at the hotel from the point of view of the guest. Is it convenient to get to it from the airport, train station, port, etc? How close are the bus stops, metro?

Walk to the most popular tourist places to feel how convenient or inconvenient it is, the map will not give you this feeling.

Do you feel comfortable in the hotel? 

It's mostly not about the mattresses and the color of the walls, which can be easily corrected, although they are also important, but about the structural features of the building that you can not so easily correct: small windows, low ceilings, a tiny and cramped lobby, etc.

Go to the rooms from all sides of the building and consider the view from the windows. The guest is unlikely to return to the hotel, if instead of a beautiful panorama of the street, park or at least a courtyard, he will see the gray wall of the neighboring building.

View all available room types. When examining the rooms, sit at the table. Are you comfortable with everything that is located at hand? Are the sockets conveniently located by the bed? Look at the size of the shower cabins.

In most cases, you will need to invest not only in the building, but also in management, marketing, and so on. The costs will depend on a number of individual management factors, such as seasonality, restaurant availability, other location and equipment capabilities, PMS system, personnel, etc.

Like any investor, you must calculate the payback period for your investment. To do this, request reports and documentation about the hotel's performance for the last 3-5 years:

  • Managing data
  • Accounting statements.
  • Tax returns.
  • Staffing table.
  • Accounts receivable.
  • Accounts payable.
  • Contracts.

If the buyer plans to buy a hotel solely as an investment and does not have its own management company, then the services of a third-party management company should be considered. Managing a hotel with more than 50 rooms is a complicated business that requires a strong management company.

Such company should love what they do and know what should the structure of a cost-effective hotel look like. They will make an accurate calculation of profitability; provide logistics of client flows, organizational, marketing and other components of successful enterprise operation.

Find a reliable partner-a company that will help you professionally find a suitable property for you, do calculations and make a deal.

To check a potential hotel that you want to buy, you can invite specialists from our company.

Natalia Kalinichenko
About the Author:
Development Manager
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