Selling a Hotel: Process, Valuation, Mistakes, Investors – Selling Hotel Real Estate
Selling a hotel –
Selling your first property: Hotel sale
You have never had anything to do with the sale of a property? Then I want to give you a few general tips on the process of selling real estate.
On many Internet sites and in online portals, you are mainly pointed to the typical procedures, such as the question, sell with or without a broker? Hotel owners should not ask this question at all, after all, it is about more than “just” a condominium.
Operators of hotels have a special property, with special dedication, many are already a custom-made, with a view to cutting (and dedication). Accordingly, for this type of property you need special buyers.
So selling a hotel is not just about having the right documents and paperwork, it’s also about having the right, ideally exclusive, marketing strategy.
As you can read in the article Selling Property, selling property is about 3 phases. First comes 1) the preparation, then 2) the marketing and 3) the selling process.
Preparation at a glance
The first step is always about the right strategy. The first step determines the entire sales process. Within the strategy, you determine the timing of the sale, you collect the necessary documents for the evaluation of the property and the economic forecast for the future of your hotel. From this, the offer price is then determined.
For the increase in value of the property, it is also worth thinking about beauty corrections and renovations. These are the first, important steps in the preparation.
More on that later.
Sales phase: Discreet or on portals
After that, it goes into the sales phase. In the sales phase, individual contacts are approached in a targeted manner. At least for exclusive sales in the off market area. The wealthier the parties involved, the more valuable time is. Time is the one commodity you can’t produce. Money is not an issue for these types of buyers. Proof of financing, non-disclosure agreements, everything is immediately available.
Accordingly, these investors only want to be presented with offers that no one else has access to. If you waste a month as an investor with a volume of over ten million euros, you will be extremely frustrated.
Just the reputation plays a big role in this circles. From therefore also our recommendation, if you are already at this point in the article:
Don’t burn your property on online portals. You may get hundreds of inquiries here, but who really has the credit rating? Who should write to all of them, check credit ratings, talk, meet them, negotiate? Rather off market, targeted to 1, 2 investors.
Finally, it continues now with the entire, first communication. Sifting through enquiries, checking the creditworthiness of interested parties, further information, telephone calls, right up to the viewing appointment and, of course, the negotiations.
How many stakeholders do you want to go through this process with?
Time is money.
Sales transaction: purchase contract, notary and taxes
The last step is then the sales process. Here it is mainly about the purchase contract, the notary appointment and the handover of the hotel.
That’s roughly it, the entire process in selling a hotel. If you want even more information about selling your first property, read more here:
You can find everything on the subject of taxes here:
Here we have summarized the process, in its three phases, once again for you:
- Preparation: Prepare hotel and sale
- Broker appointment
- Prepare hotel
- Offer price
- Marketing strategy
- Take inquiries
- Contact with interested parties
- Credit check
- Viewing dates
- Sales pitch
- Contract of sale
- Notary appointment
- Land register entry and purchase price
- Invoices for notary and broker
- Pay tax
Work both real estate sales with professionals, then you don’t need to watch out for real estate sales mistakes.
Always a good place, hotels in
Timing and time pressure in sales
Too much stress, the high age, or even the lack of succession. Various factors sometimes influence the time in which the hotel is to be sold / must be sold! So do not wait too long if you can estimate certain factors (pressure through finances, pressure through age or desire from the end of the business).
The reasons for the sale can be different:
- Too much stress at work
- High age
- Lack of succession
- Credit Print
Before your planned hotel sale becomes a distress sale, you should think about the optimal time in good time. The ideal case is: You have no time pressure. If you do, you need to prepare yourself all the better for the sale.
Do not sell “too late” when the sale is foreseeable, otherwise there will be time pressure
However, due to countercyclical effects, you can also slip into a phase in which the demand for hotels, from the investor side, is lower.
Sources of error: Selling without experience
Poor or insufficient preparation can lead to legal errors, but also to tax errors. So do not wait for years and postpone the sale, if certain factors can be estimated.
However, mistakes can be made not only in the preparation phase, but also in the later sales phase when it comes to marketing the property.
Even inexperienced real estate agents go the wrong way and “burn” the property, e.g. by listing the hotel on all real estate portals. Especially large investors quickly ask themselves the question:
What’s the catch if the property is on all real estate portals? A further check does not take place at all.
The tip here: Off market sale, directly to operators, investors, foreign investors and funds. Especially in the area of hotel real estate, discretion and anonymity for the seller side is often a very important issue in the process.
Anonymous and discreet: Direct to investors
We always pay attention to the highest discretion and anonymity in the sale of our customers. Hotels that fit our purchase profile are only communicated internally to known buyers. Even this communication takes place in several steps.
Investors are informed in a targeted, discreet manner
In the ideal case one creates with it already a 1:1 match. That means one seller, one buyer and no information about the sale and the object comes to the outside. Especially for families, in which it is also about the topic of real estate inheritance, just as important as for entrepreneurs who do not want others to know about the upcoming sale.
How much is my hotel worth?
When selling real estate, people usually assume that it’s all about the construction and the substance.
For investors and capital investors, however, it is always about the return = profits of the future.
The decisive factor in valuation, for hotel properties as well as for companies, is future income, i.e. revenues to be generated by cash flow.
Buying rental property is no different.
And again, as in general real estate sales:
Location, location, location!
The tried and tested comparative value method helps with the valuation. Simply explained: Are there any hotel or restaurant businesses in the vicinity that have been sold recently? If so, this information can be used to determine offer prices for your hotel and forecast sales prices.
It always gets expensive, for example, when it comes to Kitzbühel.
Source of error: Valuation from broker is too high
The later offer price of the hotel is important, because here it is decided whether interested parties bite or not – simply said. Price too high, area too small, no interest. There are 2 sources of error here:
- Wrong asking price of the owners
- Too high a valuation of the real estate agents
First to the wrong, too high asking price of owners, before the first broker appointment.
For a first, rough evaluation, many take a look at online real estate portals. There, however, you will find offer prices (!), not the final sales prices. Just because a hotel property is offered for 20 million, does not mean that the hotel will sell for 20 million. Keep this in mind when you check prices on online portals yourself in advance.
Another source of error lies in the selection of offers by the estate agents. More specifically, in rating the real estate agents too highly. They will say, “great, a great rating”. But again the reference to the customer:
Price too high, area too small, no interest.
If the valuation of the hotel is too high, no interested party will be found and this brings us back to the beginning, the pressure to sell! So if you ask for offers from several agents, do not automatically take the real estate agent with the highest rating. Make sure that critical aspects are also included in the evaluation. This will increase the success and speed of the sale!
Choose brokers who also take critical aspects into account instead of looking for the highest rating
Buyers will be just as critical and, in case of doubt, will bail out, possibly already at the first contact.
Time and offer price determine success
Advantages Off Market: Direct investors, discreet hotel sales
Therefore, our recommendation is, trade your hotel exclusively. This means one partner, no real estate portals, but real estate investors, capital investors, direct contacts from a network. The technical term for this type of real estate sale is, as previously learned, off market.
The advantage, through the exclusive sale, solid investors can be addressed. The sales process is much faster, sometimes it takes only weeks instead of years.
With the right partner at your side you will not only reach the regional market of investors, not only the national market, have you ever thought about the international investor market?
Many investors from abroad are very interested in real estate in this country. Everything on a grand scale, for real estate funds, families but also large hotel chains that want to gain a foothold in this country. That’s why we don’t just talk to investors from our own country, if the return is right, the property information discreetly reaches investors from all over the world. A big advantage for you as a seller, here the money sits a little looser than with domestic, checking and researching the investors if a goal is to be met.
Documents and records
When selling a hotel, far more documents and figures are necessary than when selling private real estate. The new owner needs business figures, facts about the lease agreement and the operation of the hotel.
All information on rooms, occupancy levels, seating and capacities are included in the decision and show the prospective customer whether your hotel is suitable for his intended use.
In order to convince an experienced hotelier or a prospective hotel operator, the documents must be complete and all figures must be verifiable.
Without a savvy realtor, selling a hotel becomes difficult and comes with some pitfalls that should not be underestimated.
Alternatively to the sale you can choose a lease. Which variant is the best solution for you as the owner, you can find out in a comparison of the two options and in a competence consultation from the real estate agent. Basic information in both cases includes informing you whether the hotel is currently vacant or whether you are seeking a change of ownership in the course of operations.
Sell hotel – Conclusion
If you want to buy a hotel, you need a strong partner, because the best properties already go away in advance. Through local acquaintances and networks, the most lucrative properties are usually bought before they even appear on the market and on real estate portals. As a rule, you will not find the absolute premium objects on a real estate exchange.
As a seller, you also benefit from these more exclusive deals. Because of course, a higher sales price can be achieved as long as the objects are still traded exclusively. Here, the one or other buyer with the purchase price for the hotel still goes up a little, so that the offer does not go further. From country hotels to boutique hotels, there are excellent conditions for hotel sales with brokers in the current development of domestic tourism.
If you want to sell a hotel, the professional approach from the beginning is of immense importance. Unlike with privately used properties, the comprehensive valuation and marketing strategy play a concise role. Which group of buyers should be addressed by your offer? Which conditions are relevant in the current lease and which reputation does the hotel have? All these aspects have an effect on the offer price and decide how great the interest of experienced hoteliers is in your property.
Statistics: Tourism boom
As already mentioned at the beginning of the guide, domestic tourism is booming and has been shining for over 10 years with ever new record figures. Accordingly, the number of overnight guests and the demand for hotels in the real estate market is increasing. From the chic, luxurious boutique hotel in the city centre to the hotel with connected gastronomy and event areas. In Germany, people are not only taking more holidays, they are also spending more on them. Thus, prices for overnight stays are rising and the hotel industry is becoming a lucrative business for more and more companies and entrepreneurs.
Ergo: The real estate market and tourism market are both on the upswing right now. If you sell now, you’ll get a good sale price – why wait for the next real estate bubble? We show you how to take the current profits. Trade your hotel property anti-cyclically.
You want more interesting facts and figures from all over Germany for real estate owners? Read more about real estate statistics here.
Here is the proof – tourism in Germany has been booming for years! With a new concept, old hotels can quickly appear in new splendour. You can find more interesting statistics on domestic tourism and the effects on the hotel industry under the diagram and the “Procedure hotel sale”.
Overnight stays by guests in Germany
Guest nights in German accommodation establishments from 1992 to 2018 (in millions).
Tourism Contribution to gross domestic product
Development of the direct and total contribution of the German tourism industry to the gross domestic product in the years from 2012 to 2028 (in billions of euros).
You can find more statistics at Statista
Development of the direct and total contribution of the German tourism industry to employment in the years from 2012 to 2028 (in 1,000).
Number of hotels by hotel stars
Number of classified hotels in Germany by hotel stars (as of January 2019).
You can find more statistics at Statista