Key Points to Consider When Buying a Hotel

Buying a hotel is a popular way to own a business in the hospitality industry. The industry attracts hundreds of buyers each year from the semi-retired to motivated young hospitality professionals looking to invest and build their future by buying a hotel business, a bed and breakfast, a lodge or a guesthouse.

There is a huge range of hotel businesses for sale in New Zealand, so it pays to do your homework well. One of the easiest ways to research the hotels for sale is online; also check out local newspapers and the hospitality trade magazines.

Key factors to watch include:

The basic rule of real estate; Location. Pick a location that is attractive to you and patrons. Decide what type of hotel will best suit your needs, then investigate the market, the demand, surrounding area, attractions, competition and if it’s a good area to invest in etc.

– Does it stack-up? Determine why the current hotel owners are selling. Work out what the hotel’s returns will be for the next three to five years based on your researched figures with best and worst case scenarios. Watch for expenses that are missing, or are unusually low or high. Ask a lot of questions and get answers that can be verified. Will this give you a suitable return on your investment? Make sure the numbers work for you.

– Research & Check; the financials – use your accountant and review the accounts and compare industry benchmarks, if possible go review accounts from the past three to five years. Check with town planning for future development and any work that may interrupt business. How’s the access and parking? How close is the competition, will you have an advantage over others, and what resources will you need.

– Reputation. Ask around; what kind of reputation has this hotel got, how does this relate to the competition. Check out the online guides too. A bad reputation can be difficult to change.

– Inspect the building; Inspect the hotel from the inside out. Look at every aspect of the building; use a building contractor you trust, and validate any documentation of repairs and remodelling. Identify future expenses.

– Know what you are buying; Seek professional advice on what the market value of the property is, have everything listed that comes with the business. Check all licenses and compliance requirements are in-place. Review any contracts that the owner has with suppliers and customer groups.

– The future. Understand your target market, and any opportunities for future growth. Also any possible threats from future changes and competition.

Make sure the numbers work for you and the business meets your criteria. Working in the hospitality industry can mean some long hours, so expect a very busy first year as you learn and fine-tune your business. Find a good hotel minder to allow you some free time to recharge your batteries.