Everything you need to know before selling your Assets.
All things involved in the process of planning the disposal of a hotel such as how the sales price can ensure correct market value, the timing to sell, choosing the right agent and marketing strategies need to be considered carefully.
Hotels and resorts are usually sold as operational entities. Therefore, often all operational agreements continue, new bookings, equipment hire, and staff contracts may remain. This particularity gives hotel sales it’s uniqueness that in many cases leads to added value in the investment in the long term.
Generally, the public is unaware of any deals taking place worldwide to prevent any disturbance in the service provided by hotels and is absolutely vital to both the buyer and the seller if the property is to continue trading as well as it should. As the income earned from the hotel remains with the seller until it is transferred, it’s vital to find investors that are committed to profit from their investment.
It is always worth considering franchising agreements clauses. On a managed property is worth diving deep in the data room and looking for opportunities that an investor might have to improve revenue.
The first step is for the owner and their agent to determine what is actually required, and then to agree on fees and the terms and conditions of the instruction. A different approach may bring more value from the asset. It might be that holding the property for a short while to have changes made to the business to allow the property to be sold for significantly more.
It is fundamental that the terms of the agreement between the owner and the agent are agreed in the best way, normally it will be an off-market transaction, and initial due diligence to ensure the property will attract potential buyers is made. Opportunities to enhance trade will be discovered or potential solutions can be considered to ensure the maximum financial outcome.
The data room, including details on the title (preferably a report on the title), statutory documentation (including planning records), financial records, and employment data need to be reviewed. Any licenses, subleases, or agreements with third-party operators will also be reviewed for their impact on the potential profitability, Any treasure hunting opportunities should be sought and considered as to how they will best help sell the property.
The disposal method and process will be agreed together with the specific marketing strategy. Potential buyers will be discussed in detail, with a specific plan designed and followed by the parties. A ‘guide price’, may be considered at this point.
This involves the production of any marketing material and preparing an online area where access can be granted to specific parties so they can fully evaluate the opportunity, while still retaining a level of confidentiality for the seller.
Typically, it will include legal documentation (leases, title documentation, operating agreements, statutory licenses and consents), financial reports (with full historic and budget management accounts), a property’s details (floor plans, surveys, reports, valuations, photographs), general market information (data on the local area and local market) and employment sector details (staff details and sample contracts)
In the best-case scenario to determine which offer is the most favourable to the seller is the highlight of the process. This may be the highest offer, the quickest or the offer that has the least risk, only offers from reliable sources have to be considered.
Typically, the seller will provide an exclusivity period to the purchaser, while they work through the due diligence for financial, legal, valuation, and condition. This will involve one party spending significant amounts of money on due diligence and is only usually possible when a property is particularly desirable to investors.
The next stage is to exchange contracts with an agreed completion date. There will usually be a stock audit on the day of handover, with an additional sum paid on the basis of actual stock, prior to the completion of the final deposit.
Agent’s Perspective of the sale
Determine the scope of work
Visit the property and agree on sales strategy upon documentation review
Agree on asking price
Produce marketing collateral
Prepare data room
Select potential buyers that look for the exact type of investment
Provide an exclusivity period
Help through due diligence process (legal, financial, valuation, condition)
Complete the transfer
lt is important for anyone involved in the hotel business to have an understanding of the various factors that will determine how much money their hotel could sell for when assessing value it is important to focus on the bigger picture, anything that positively impacts these three factors will help enhance the potential sale price:
Purchaser willingness to pay for the type of hotel
Infrastructure and renovations
If the property has a higher alternative-use value and the seller has taken steps to open up the opportunity, by gaining planning consent for a change of use and undertaking an independent feasibility study for renovation, then the offers received are more likely to reflect this additional value.
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