Buying a hotel – second viewing

So – you’ve decided that you’re buying a hotel,  viewed a few hotels… made a shortlist. What’s next? The obvious answer is book  a second viewing at your ‘definitely maybe’s’… but before you do that, let’s get a few things into perspective.

  • Finance for buying a hotel- are you in a position to make an offer with finance in place?  At the very least when placing an offer, the vendor may expect that you either have proof of funds to purchase or that you have a property on the market which is under offer.
  • Ready to go? – if you place an offer, the usual timescale for conveyancing is about eight weeks. If you plan to move in on the day of completion, you will not only be dealing with all the stress of moving – there is a good chance you will also have guests either insitu or checking in.

Buying a hotel – The Second Viewing

When I viewed the hotel I eventually bought, it was in the spring –  only a few rooms were occupied, enabling me  to view the rooms properly. This hotel wasn’t my first choice – I had placed an offer on another one but that fell through when the sale of my house came to an abrupt halt. I had previously considered it though and when I was in a more stable situation with my house sale, I made an appointment to view it. First viewing was a quick walk through and a brief chat – difficult to expect anything more when the vendor has guests in. I returned a week later, arranging a time when the vendor could spare an hour to discuss the business.  Here’s some of the questions I asked;

Business – 

  • Turnover – all the information you need will be on the accounts provided to the estate agent but you may not be able to obtain this as soon as you would like.  Take a pad and note it all down – turnover is the main figure you are interested in. That’s the money coming in. The profit figure … I wouldn’t take too much notice of that to be honest as it can depend on lots of factors, the main one being your mortgage/business loan. The vendor of one of the hotels I  viewed had virtually no profit whatsoever on her accounts because she had a huge mortgage on the property.  Take notes of turnover then ask about business rates, running costs (gas, electricity, utilities, insurances etc).and  catering and laundry costs, Once you have these basic figures, add your own mortgage figures into it if you have one, you should then be able to calculate if you are going to be in profit.
  • Room rates – I commented that the rates advertised on the tariff board seemed quite high. The vendor replied that it made sense to her to have five rooms occupied at a slightly higher rate than ten rooms occupied at a bargain price. The rates on the board were also typical of the highest rate she charged and a discount was always offered for regular guests.
  • Advertising – I asked where she advertised – she said that she did very little paid advertising as she had a good return guest rate. She was reluctant to tell me where she did actually advertise, explaining that if I didn’t buy her hotel and bought another one, it is likely I would then advertise in the same place. Advertising details to be divulged on completion day.
  • Property – . I asked about the boiler as during my ‘hotel hunting’ I had heard more than a few horror stories about new owners buying  a hotel only for the boiler to suddenly pack in. Vendor explained that although the boiler was an old style cylinder type, it was reliable. She produced the certificates to prove that it had been serviced on an annual basis. I also asked about the roof – most hotels are at least three storeys high. You should be able to see from across the road if the roof looks okay.  Take a few photo’s on your phone so that you can zoom in on any slipped slates etc. It is worth mentioning here that if the hotel has a ‘majority’ flat roof, you should mention this to your mortgage company prior to paying for a survey. A flat roof isn’t ideal and some insurance companies won’t cover them.
  • Room facilities – ask if you can have a wander round on your own if there are unoccupied rooms. If you can access a few rooms, you can get a feel for the general condition of items such as mattresses. Pull the sheets and mattress protectors back – have a good look. I viewed a hotel where the hotelier insisted on accompanying me and was very defensive. Without telling her I was going to do it, I pulled a sheet back… the mattress was AWFUL!! I didn’t need to look any further.
  • Bathrooms – have a close look at  the toilet cisterns,.. are they standard plumbing? Some hotels have an entire top floor fitted with Saniflo cisterns – these require an engineer call out if they are blocked.  Shower units – are they modern or straight out of the seventies?
  • Beds – divans or rickety beds on legs? Nothing worse than a creaky bedframe!
  • Carpets – any signs of threadbare patches?
  • Living accommodation – is there enough room for your family to live comfortably? Most hotels don’t have extensive private facilities and it’s not uncommon for  hoteliers children to make use of a bedroom which should be a letting room. Personally, I wouldn’t recommend this. Not only are you losing income on the room but the guests in your hotel are on holiday and won’t be appreciative that your kids are in bed on a school night.
  • Car parking – enquiring about parking for your own car is an absolute must. If you view the hotel out of season , it will seem that there is plenty of on street parking. In the summer, the spaces will quickly fill up with tourists and you will be lucky if you can park anywhere near your hotel. Off street parking, perhaps in the back yard, is high on the priority list.

If you come across any negative points, you can then decide if you wish to pursue the sale or walk away. It all depends on what you find and how much the problem will cost to fix,  Replacing shower units which are old fashioned but functional is an expense which can be undertaken over a year, a few units at a time if necessary. Replacing carpets and mattresses is a more immediate and expensive project.

If you are considering buying a hotel, read our earlier articles about viewing a hotel