How to Sell a Hotel Business

The hotel industry in the United States is growing which is certainly good news for hotel owners intending to sell a hotel business.

In 2022 there were at least 132, 228 hotels and motels scattered across the U.S., 8.3% more than in 2021. Forecasts are predicting that in 2023 there will be nearly 2,934 hotel openings across the globe, up from 2,246 opened in 2021.

If you’re a seller, all of this is welcome news as it’s a testament to the fact that the industry is rearing to regain its former post-COVID glory. While selling a hotel can indeed be difficult, with the right professionals guiding you, it can be a seamless affair. Here’s what you can do to get the best return on your investment.

Step #1 Get the Business Ready for Sale

This may involve:

Sorting out financial records: Organize your financial records. You should have them audited by an external auditor. This lends credibility to the financial statements you present to potential buyers.

Carry out maintenance work: First impressions of your hotel matter. Any issues that may reflect negatively on the value of the establishment must be addressed.

Ramp up performance: What can you do to increase and improve performance? Do you need to work on customer service or perhaps revise your marketing strategies?

Step #2 Have a Business Valuation Done

Determining the value of your hotel is best left to a business valuation expert. The value will be calculated taking into consideration:

Financial records: From balance sheets, and cash flow statements to your profit and loss statements, the valuation professional will study these to gauge the hotel’s financial health.

Market trends: These will be weighed into the final valuation. What’s happening in the hotel industry and how is this affecting your establishment?

Similar establishments: To ascertain a potential selling price, the valuation expert will look at the selling prices of hotels of equal merit that were recently sold in your area.

Step #3 Develop a Sales Pitch

We’re getting closer to putting the business on the market at this stage. But first, you’ve got to develop a sales pitch that’s going to get the attention of potential buyers. You’ll want to position yourself correctly and avoid mistakes. Here’s what to include:

A presentation: A neat and concise presentation showcasing the best features and strengths of your commercial establishment. Play up the favorable location, the amenities present, and the brand reputation built over the years.

Testimonials from happy patrons: The hotel business is one where the satisfaction of clients is a top priority as you want repeat business. Demonstrate to prospective buyers that your hotel has a loyal clientele that is happy with the service.

Step #4 Market the Hotel

With a carefully crafted sales pitch, you can now venture into the marketplace to find potential buyers. Marketing is best done through:

Business brokers: Working with a business broker can be beneficial because they can market for you across a network of channels and private investors and equity firms they might be in contact with.

Networking: Attend industry events with the purpose of networking with prospective buyers at trade shows, conferences, and galas.

Putting ads in industry publications: Industry publications are ideal places to place strategic ads as it puts your business right in front of your target audience.

Step #5 Find Interested Buyers

With your marketing complete, it’s time to carefully prospect for leads. Finding interested buyers includes:

Getting help from business brokers: Brokers work hand-in-hand with you to discreetly find buyers while also helping you with the finer details of the sales process.

Entering talks with industry contacts: Reach out to key decision-makers within the industry who are involved in M&A. Some hotel chains are always interested in adding more hotels to their repertoire à la Wyndham Hotels & Resort style, the company with the most properties worldwide.

Step #6 Negotiate Contract Terms and Close

Once you’ve generated a good number of leads, it’s time to carefully assess each offer on the table, choose your preferred buyer and negotiate contract terms. Your broker can lead these discussions.

Among the points up for negotiation will be:

The selling price: There’s quite a bit of back and forth that may happen as the buyer tries to get you to lower the price. It’s important therefore to have an expert representative in the form of a broker, to fight for your best interests, ensuring you leave no money on the table.

Payment terms: How and when will the sum agreed upon be dispensed? Will it be a lump sum or a payment plan will be established?

Miscellaneous conditions: Are there licenses in need of transfer and permits that need to be renewed?

With these terms of the sale settled, both buyer and seller can proceed to close the sale. This is a process that your individual brokers, attorneys, and accountants should facilitate.

Get the Help You Need

If you’re ready to sell a hotel business or would like to discuss your options with a business broker, contact our Sun Acquisitions team today.

Looking for insight on selling a different type of business? Check out these links:

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

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