Buying a hotel is unlike buying any other real estate property or other movable or immovable property. There are a completely different set of parameters that one should keep in mind while going in purchase of a hotel. The valuation techniques are different, the tools used are different and different methods of valuation are used. While in a normal valuation emphasis is given on the cost and sale factors, when buying out a hotel more emphasis is given on the revenue that the new hotel will generate over a period of time. This is because revenue is the lifeline for any hotel and it has to be satisfactory and sustainable over a long period of time.
The role of a property valuer while being very important, one has to keep in mind that traditional real estate valuers may not be able to fit the bills as far as these types of valuations are concerned. This is because of the facts mentioned above. Hence as a customer you should look for property valuers who have rich experience in valuing hotels or using the revenue model frequently as a method of property valuation.
Further as an entrepreneur you should look for buying out of hotels as an option only when the organic growth avenues have dried up. This might take quite a few decades and therefore one should not hurry through the process of buying out hotels but it should be deliberated, thought through in great detail and should be taken up only when it is found very feasible. As an entrepreneur you have to bear in mind that it costs thousands of dollars to buy a hotel and most of the times the funding would be through external borrowings rather than from accrued savings. Hence, you should be reasonably sure that you will be in a position to service such high cost debts and that too for a long period of time. The revenues generated in the short, medium and long term should justify such an additional expense for a long term.
To begin with, before you value a hotel you must ensure that some basic facts and figures are in place. You must know the occupancy rate of the hotel accommodation over the past few years. Further, if you are having your own restaurant you should be in a position to come out with the sale figures at least for the past two years. The historical information is very important to value the hotel because of various reasons. Based on such information it will be possible for you to plot the future and expected revenues of your hotel.
While the land and the building has an important role to play while valuing a hotel, these are just one part of the story. The biggest source of revenue for any hotel is without doubt from the room tariffs and restaurant business. Hence, when you are hiring a valuer for valuing a hotel, he or she would look at the value of the hotel only from the revenue perspective. Even if your hotel is situated in the best of locality it will hardly make any difference to the overall valuation unless you are reasonably sure about the number of customers who will walk into your rooms and the restaurants.
Further when you are hiring a valuer for valuing your hotel, you should look for those professionals who have experience and expertise in this job. There is no point hiring a typical real estate appraiser who is good at valuing hotels only from the cost and sales perspectives. Further, such valuers should be able to understand about the emerging trends in tourism, eating habits and other such things which could have an impact in the occupancy rates ultimately affecting the value of a hotel. In conclusion, there is no doubt that valuing a hotel is easier said than done and only those who have the experience, infrastructure and wherewithal would be able to do it.
The simplest and easiest reason for success in the hotel business is being able to have a long term view of the business instead of looking for short term gains and fast money. Hotel business needs lot patience and the learning curve on many occasions is quite big and long lasting. Hence, as an entrepreneur if you wish to successfully build your hotel business, you must keep in mind this important fact.
Apart from patience and perseverance, understanding the business thoroughly is very important. This again takes time and unless you are very sure about how a hotel is to be run, you should continue with the same hotel instead of trying to either build a new one or buy over an existing one. You should also have a long term vision of your hotel business and should be willing to take calculated risks.
Running a successful hotel business also requires a lot of capital infusion and therefore you should be prepared to do it. You also need to constantly invest in people and training of human resources. You should constantly update your daily processes and systems keeping in mind changing customer needs and requirements.
Further you must understand the in spite of the best business practices and aggressive marketing, it might not be possible for you to keep the growth momentum going beyond a certain level. In such situations it is important for you to find out new methods of increasing customer base and buying over existing hotels is without doubt a very good idea. This is often referred to as inorganic way of growth and could fetch you good results provided you are able to pick up the right hotel.
When buying out a hotel you need to take the help of many professionals including a property valuer. A typical real estate valuer may not be able to meet the totally different requirements as far as valuation of a hotel is concerned. Unlike a real estate building or apartment, where future growth in the value of the property is important, as far a hotel is concerned, a valuer also needs to take into account other factors such as revenue realization and other such important points.
When you are deciding to buy or sell a hotel there are quite a few important factors that you should keep in mind. First and foremost, it is very important that you make up your mind whether you need to get into this transaction in the first place. Your decision to buy or sell a hotel property must be based on sound logic and reasoning and there is no place for emotions and sentiments in it.
Once you have decided to get into the act, the next important role is to identify the right property valuer for valuing the entire hotel premises that you are either planning to buy or sell. You have to bear in mind that valuing a hotel is a separate cup of tea and is not similar to valuing other real estate properties such as homes, apartments, offices, or commercial establishments. There have to be several other yardsticks that have to be used.
Occupancy is the biggest important factor that needs to be taken into account when a hotel is being bought or sold. As a buyer you should impress upon the valuer to come out with a valuation that takes into account the expected occupancy levels in the short, medium and long terms. This is very important because this and this alone will impact the revenues over the entire life span of the hotel. Based on revenues only will it be possible to apply for loans to fund the buying of new hotels. The revenues generated should help you to comfortably service the loan installments which could run for a number of years.
Amongst the various other factors that need to be taken into account, one cannot afford to ignore the importance of location of the hotel premises. This will again have a major impact on the revenues that are generated from the hotel and hence you should always ask your valuer to keep this factor in mind while valuing a hotel. There are other factors too such as the quality of rooms and other services and amenities, the food and beverages that are served in the hotel and other common facilities that it has to offer to the customers.
There are quite a few ways by which you can overcome competition and move to higher levels of success as far as your hotel business is concerned. It is quite likely that in spite of your best efforts you may not be able to retain all your existing customers on a permanent basis. As customers even we would be willing to try out new things and the same applies to those who visit your hotel and stay in it and also enjoy the food that you serve to them.
Under such circumstances it is very important for you to find out ways and means by which you can reach out to new customers while striving hard to retain existing ones. For example, you could buy out new hotels and restaurants in your bid to expand your client network. This is easier said than done because buying out a new hotel certainly costs lot of money and could run into millions of dollars. Such buyouts and growth through this route is considered inorganic because it is not in the normal course of your business. This is perfectly fine and legal provided you know how to go about it.
Amongst the various factors that you should keep in mind while taking over existing hotels is the need to ensure that you are buying it at the right price. What is the right price cannot be determined by you as an entrepreneur because there are various aspects to it. It is therefore of paramount importance to take the help and assistance of professional valuers when buying out hotels in your bid to grow inorganically. These valuers should be specialized in helping you to have a right fix on the fair market value of the property in question. They should be able to value the business takeover proposition using the right tools and methods. Revenues that are expected from such takeover are the important factor to be kept in mind while you are looking to buy such hotels. Of course there are other considerations too such as locations, quality of hotels just to name a few.
Buying and selling a hotel is as simple as buying other real estate properties. There are a number of factor and points that need to be considered. Any hotel buying could run into thousands or even millions or dollars and hence it is not small money. Both the buyers and the sellers would therefore move very cautiously and ensure that there are no loose ends left untied or there are no sudden surprises along the way. So here are a few important points that need to be taken into account when buying a factor.
First and foremost, the decision to buy a new hotel must be based on sound economic and financial objectives. It must be thought through quite a few times and it is always better to involve more than one brain while firming up the decision.
The next important point is to identify the property based on various factors such a location, quality of the hotel, business potential just to name a few. It would not be possible for the entrepreneur to perform the task of valuing or evaluating a hotel property. The job should be done by a certified and government approved property valuer. It should preferably be a company that has rich experience in this field.
However, as mentioned in the beginning valuing a hotel is a totally different cup of tea. A number of factors need to be taken in account. The revenue that is expected to be generated from the hotel is the main aspect when valuing a hotel. The revenues over a period of time should justify the expenses that are being now incurred on the purchase of the hotel. Hence, choosing the right method of hotel valuation is very important failing which things could totally awry.
There are other factors that also need to be taken into account such as the quality of food that is being served, the quality of human resources, the quality of rooms and other facilities just to name a few.