It happens again and again that hotels are sold. In the end, a Hotel Purchase means: a property changes its owners. Currently, there are many companies or funds that buy hotel properties and then try to operate them at break-even. Most of the time, it is the case that the hotels were simply not profitable before. The operators failed to run the hotel profitably before.
- What factors are often not considered when buying a hotel?
- How is the real estate valuation of a hotel done?
- Which KPIs are important?
- The hotel purchase is complete, what do you invest in now?
- Why do so many hotels go out of business in Corona times?
- Conclusion
What factors are often not considered when buying a hotel?
Demand:
What is the demand like in the hotel or the region? Does the region have a high demand for guests, and does it make sense to open a hotel here?
For this you need benchmark figures. You can get such figures from Fairmas, for example. It is also very important that you analyze the data of the previous hotel in more detail. Ask yourself why the hotel did not pay off. Why did the regular guests drop out one by one and why did no new guests come? And what are the reasons for being able to buy the hotel?
The data from the PMS will tell you more about the hotel. Also our product happyhotel helps you to analyze the PMS data in more detail.
Balance sheets/ financial data
What were the biggest cost blocks and where did most of the money go? You can see this in the financial data.
You can also see the revenue that the hotel generated.
Finally, you should ask yourself why the hotel is being sold. Are there economic reasons for it? Your long-term plan should of course be to build up the hotel profitably. Therefore, as with a business, you need to build a financial plan.
How is the real estate valuation of a hotel done?
How does the purchase price of a hotel or a property come about? Ultimately, you pay a price for the square meters available. Often, this price can vary greatly.
In addition, there are other factors that influence the hotel price:
How many square meters of habitable space does the hotel have?
What is the total property size?
How many rooms does the hotel have?
When was the house built?
Has it been renovated recently, if necessary?
Is the hotel currently open?
Or has the hotel been vacant for some time?
When, or since when, is the hotel for sale?
Where is the hotel located?
Is there an evaluation report?
Hotel Purchase: Which KPIs are important?
Before you decide to buy the hotel, investigate the relevant hotel KPIs to make an assessment of the hotel’s success. In the hotel industry, there are many different KPIs that provide information about success and failure.
Here is a summary of the most important KPIs for you:
RevPAR
ADR
Occupancy
CPB
Regular guests
It is also interesting to take the development of the figures from the last few years. From this you can often see where the problem lay and what could have led to the failure.
The hotel purchase is completed, what do you invest in now?
Most of the time, hotels are renovated right after the purchase because the previous owners missed to reinvest. As a result, the hotel has slowly but surely become uncompetitive. The new owner can often take out another loan for renovation relatively easily.
Often, digitization is emphasized directly at the new start and one tries to work directly with modern systems here. This makes a dynamic start easier for you and you usually even save money with new, modern systems!
Why do so many hotels go out of business in COVID times?
Many of them were already struggling to pay their staff, and new loans were needed again and again.
However, this does not have to lead to the hotel being made directly up and running by a new owner. Often a lot of time and effort is behind it to make a hotel a successful one.
Currently, there are many hotels that are on the verge of going out of business. This is very interesting especially for many investors, because they can get cheap hotels and buy hotels. In addition, there is currently a lot of money on the market that investors want to invest to get a return. Thus, there will probably be some new hotel owners in the near future.
Conclusion
In my opinion, it is important to know what you want to achieve with a hotel purchase and what you will do differently than the previous owner. Only if you can answer these questions, you can be successful with the new hotel.
You can read more here or what a video from an investor:
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