Buying Your Hotel – Your Biggest Decision

Deciding which hotel to buy, when to buy a hotel – or even whether to buy one at all – is the biggest decision you will ever make in your hotel business. Whether your business is successful overtime will depend on the first crucial decision.

Its Different for My Size of Hotel

The size of hotel you are buying does not make any difference to your approach when buying it. Whether you looking at a five bedroom property or a 600 room resort hotel, the questions are the same. Don’t believe that your business is any different because it is either small or large. The key issues remain exactly the same.

The objective of this short report is to bring these key issues into focus and to ask you to stop and consider some simple points just when you heart is screaming at you to buy. All purchases from choosing a toothpaste to buying an hotel, involve logic and emotion, whatever anyone may tell you. Yes investing in an hotel is swayed just as much by emotion as any other purchase you will make and, believe it not several £m investments deals were pushed through for emotional reasons – not logical ones!

So just for a moment, step back and consider the following statement because you will not hear it from the hotel sales agent:

The Purchase Trap

The number one trap is that people think they buying a building! They look at the rooms, the restaurant, the grounds, the car park and believe that that is what they are investing in.

And it isn’t.

If you think that private buyers are the only people who make this mistake – you would be wrong. Large companies make the same error too.

How to Avoid the Trap

When buying, don’t limit your focus to the building – the physical structure. Don’t believe that the building marks the extent of your purchase.

What you are really buying is a key to access the short stay accommodation market. That is it. Nothing more and nothing less.

If you don’t believe this, look at some of the older hotels in the country that are being changed into residential flats, or have become houses of multiple occupation, old people’s homes or just derelict because the market they once served has moved away.

This may sound dramatic, but the fact is that a hotel only remains a hotel whilst a market can be attracted to it. Once that’s no longer the case, it is just bricks arranged in a certain configuration looking for another purpose.

Understand that what you are buying is nothing more than a vehicle that will enable you to earn a future income stream by trading in selected markets. Of course it must meet certain building specifications: be sound, water-tight and offer a range of facilities etc. but the key factor is that the hotel must enable you to earn sufficient money from your future guests to enable you to cover the overheads, improve the facilities as the market demands, cover the funding requirement and make a profit.

The hotel is merely the funnel through which you will draw your revenue. It is the market that will provide the cash. So research the market the first and concentrate on that as much, if not more than, the building.

Remember that in very few cases is a hotel the primary reason why people choose to stay in it. For most buyers or guests, the hotel is a secondary purchase after they have chosen to visit an area or place. This is why recognising the strengths, weaknesses and opportunities created by the local market is so important.
Tips on how to do your own hotel feasibility study are to follow.