How to buy a hotel

How to buy a business

A hotel is a dream business for many people. Working in hospitality, meeting a wide range of new people every day, and being able to put your own stamp on something are all big draws for many hotel owners. It’s also an industry that’s not going to decline with the move to digital – people will always need somewhere to sleep.

Read on to find out how you can buy a hotel, and what to think about along the way.

1. Determine your budget

Before you start to look for hotels, it’s a good idea to decide how much you’re happy to pay for one. Working out your budget, factoring in things like running costs, legal fees and whether you’re taking out a loan, will give you an idea of the type of hotel you can afford. This will help you to refine your search, and find suitable hotels quicker.

2. Choose the type of hotel you want to buy

There are many kinds of hotel in many different areas. Hotels in seaside resorts will be very different to hotels in city centres, and deciding on a type of hotel you want to run is a must. Perhaps you have experience of working in a more professional-focused hotel, or have always dreamed of owning a B&B by the sea. You’ll also need to consider whether you want to run a freehold or a leasehold hotel. A freehold means you’ll own the building, but will come at a much higher price.

3. Look for hotels for sale

Once you’ve decided on your budget and the type of hotel you want to run, the next step is finding hotels for sale. You can find hotels for sale online which will help to narrow your search or, if you  want to go down different route, you could look for a B&B or commercial property to convert into a hotel. This will mainly be dictated by your budget.

4. Once you’ve found one, view the property

Once you’ve found a hotel you like, the next step is to view the property. It would be a good idea to stay at the hotel for a night as a guest to understand any problems it might have, assess the staff, and see whether there’s anything that could be putting guests off returning. Finding out if a hotel has problems that put you off before you enquire further will save you time in the long run. If you’d rather not do it yourself, have a friend or family member stay and report back.

5. Arrange a viewing with the owner

The next step is to have a formal viewing with the owner. They will be able to show you around the property and answer any questions you might have about it, as well as any problems you might have with the business. You should prepare a list of questions to ask before going to the viewing to ensure you get the most out of it.

6. Assess the hotel’s finances

It’s vital to look at the hotel’s financial documents before going any further. Look at the profit and loss, cash flow and any other documents they have to make sure everything “adds up”. This will give you a better idea of the value the business offers, and whether they’re asking a realistic price. It’s a good idea to get an accountant involved at this stage, as they’ll be able to help you to get an accurate picture of the hotel’s financial health.

7. Perform due diligence

Due diligence is a very important part of the buying process, and should form a large part of your purchase. It essentially means thoroughly checking all the information you have on the hotel to make sure it’s as good a prospect as it seems. Our guide to due diligence can be found here.

8. Assess the value of the hotel

If you’ve gone through the above steps and are happy that the hotel is a good opportunity, the next step is to assess the value of the hotel and put in an offer. The owner may have set an asking price which you can work from or, if not, you can use Bizdaq’s business valuation calculator to generate a valuation.

9. Make an offer

Once you’ve worked out how much the hotel is worth, and how much you’re willing to pay, the next step is to put in an offer. Your offer should take into consideration any improvements that will need to be made to the hotel, your financing situation and whether the owner will be working a handover period.

10. Negotiate with the seller

Once you’ve put in an offer, the seller will typically provide a counter offer. Try to stick close to your offer, with some room for compromise, and work towards a deal that both of you are happy with. You should also be prepared to walk away from a deal if it’s not right, even if you’ve spent a considerable amount of time up to this point.

11. Complete the sale

Once you’ve reached a deal that both you and the seller are happy with, you’re ready to complete the sale. You’ll need to agree on a closing date, and work with a solicitor to create a contract that both of you will sign to transfer ownership. All that remains is to take over the hotel and enjoy your new business!

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