|An Introduction to Buying Hotel Real Estate

An Introduction to Buying Hotel Real Estate

 

The Second Phase of Hotel Ownership

Playing the Game Without Taking a Gamble

Does buying a hotel seem like a gamble to you? It doesn’t have to be. Make the smart play by getting to know the hospitality game, its players, its strategies, and its possibilities.

Prepare for buying hotel real estate with The Hotel Owner’s Toolkit from The Passport Group. With a comprehensive understanding of hotel real estate, our hotel experts can help you make sense of the various intricacies of the hospitality game. The Passport Group uses our decades worth of successful hotel brokerage and hospitality experiences to give you detailed insights and insider tips that can help you to find the right time, place, and strategy for buying a hotel.

Hiring a Hotel Broker

If you’re looking for help or want an experienced and effective partner to assist you with buying hotel real estate, employ an experienced and successful hotel broker. A good hotel broker will guide you through the scouting process, and they’ll help you best assess the value of all your real estate options. Put The Passport Group’s hospitality experts to work for you.

We have expert hotel and real estate brokers who can help make your dream of buying a hotel into a successful reality. Whether or not you’re interested in hiring a hotel broker, The Passport Group has some helpful tips for you concerning Buying Hotel Real Estate:

Finding the Right Time to Enter the Market

Picking the right time to enter the hotel real estate market can have a significant impact on the success of hotel ownership, which begs the question: How do you find the right time to enter the market and buy a hotel?

Let’s start by examining current data on the hospitality industry; here are a couple of useful sources for fact finding and collecting data on the hospitality industry: Bureau of Labor Statistics on Leisure and Hospitality and Statistics and Facts on the Hotel Industry.

After some initial research, 2016 is one of the best times to enter the hotel market. There’s no time to like the present for buying a hotel.

Assessing Hotel Value

There is no general consensus on the best methods for assessing the value of hotels, not to mention the markets that influence the hospitality industry are in constant flux. An inspector can give you a detailed assessment of the physical condition and financial value of a property (and certainly, you should always have an extensive and complete inspection done by a qualified professional before buying a property), but the real value of a hotel is not necessarily that of the physical property itself. A hotel’s value can also be measured in less tangible ways, such as by the services and benefits it offers to customers and by the potential for future growth of nearby, influential markets.

No matter how you slice it, it’s best to consider multiple factors. Regardless, all prospective hotel buyers should gain an understanding of the financial nuances of a given hotel. Hotels usually meticulously document their finances, but these materials aren’t always readily accessible. Thankfully, an abundance of independent valuations and hotel market performance information can be found online.

Here are a couple easy-to-use tools to get you started:

Financing Needs and Options

By comprehensively assessing the value of a hotel, you may gain a solid understanding of the necessary financing required for buying it. Not surprisingly, one of the biggest obstacles to hotel ownership is finding the funds to buy, and eventually grow, a hotel business. Hotel owners often dream of maximizing profits, but a high-priced initial investment is usually required to buy a hotel.

Not only is it rare for an individual to have the necessary capital to single-handedly buy a hotel, and most individuals lack the financial means to go it alone. If you don’t have enough money to buy your desired hotel real estate, there are a number of means by which you can raise the necessary capital for your investment. These fundraising methods include, but are not limited to:

  • Finding investors
  • Securing business partnerships
  • Taking out a loan(s)
  • Crowdfunding
  • Getting friends and family to chip in/invest

Creating a Business Plan

Innovative hotel concepts do not translate to successful ownership without a strong business plan. Think of it as a plan of attack: come up with multiple options, address all potential scenarios and possible outcomes, then enact the best plan to forge a path to victory. Having contingencies for any mishaps and hiccups on the way can ensure that your business can roll with the punches, so make sure to create both primary and backup plans.

What are the components of a good business plan? An effective business plan comprehensively details the organizational and strategic framework of your hotel. This includes, but is not limited to, the following:

  • Executive and financing summaries
  • Current and future financial plans (including taxes, revenue, and costs)
  • Strategic market analysis
  • Marketing plan
  • Personnel plan (including defined roles and responsibilities for management and all employees)
  • Overviews of client products and services

Need a template to help you with the basic format of a business plan? Here are some good places to start:

Check out The Hotel Owner’s Toolkit, and visit our Blog for more hotel and hospitality industry news and advice from The Passport Group.

2017-06-05T16:18:44+00:00