What Do You Need To Know Before Buying a Hotel?
Most people say the classic Eagles song 'Hotel California' is about the excess of the American dream. However, we at Bsale think it might just be a cursory tale about the perils of buying a hotel.
It's not an easy undertaking by any means. If you're careful when you buy and you know what you're doing, a hotel can be a lucrative business. It's a massive industry after all – IBISworld estimates its revenue at around $8 billion per year.
To make sure your purchase isn't a nightmarish scene out of an Eagles song, we've whipped up three quick tips to buying an accommodation business.
Buying and running a hotel can be a difficult business.
Ensure your licenses are in order
The Department of Industry Innovation and Science's fact sheet states that your business will need a number of licenses to operate. It's best to check that it already has all necessary licenses when you buy, as securing them yourself can take a lot of time and money. Here are a few examples of things you may need a license for:
- Operating a food service business: check with your local council for details on costs.
- Renting accommodation: Applications can take as long as four weeks to process.
- Serving alcohol: If your hotel intends to serve pink champagne on ice (or any other alcohol) a liquor license is essential.
Assess the cash flow
You're most likely going to require finance to afford to buy a hotel. A loan comes with repayment obligations and extra costs, which only make it more vital that your business make money.
Before buying get detailed financial reports from the seller and make sure you understand clearly what financial state the business is in.
Before buying get detailed financial reports from the seller.
Assess key factors of the businesses success, such as occupancy rate, room rates and seasonal variances.
This will give you a clear idea of the cash flow of the business. Using this information, you'll be able to figure out if the businesses' income will be able to cover expenses and loan repayments as well as providing a sufficient income for you to live on.
Know the competition and your options
Before buying your hotel business, you need to understand the market you'll be operating in. Have a close look at the competing businesses nearby and assess what their advantages might be over yours in terms of location, facilities, staff and profitability. This will help identify where you need to improve to make sure your business is as successful as possible.
It's also essential that you look at all your options and don't buy the first business you come across. Bsale makes doing so easy, with a long list of businesses for sale in your area in one easy and convenient location.
You can check it out any time you'd like and it's always free.