How to Position a Hotel Property for Sale

By Andrew Glincher Office Managing Partner, Nixon Peabody LLP | October 28, 2008

Positioning a property for sale means getting into the mind of a potential buyer. Every potential buyer wants to believe that the property he is purchasing is vibrant and profitable - or at least potentially profitable. So prospective sellers should take whatever short-term steps they can to make the property's finances and condition as attractive as possible. In many cases, a little market research and a few renovations can have a significant impact on both the number and size of the offers received.

Many successful hotels routinely commit approximately 5% of annual revenues to renovations, but when trying to position a property for sale, it makes sense to take a good look around and see whether there are any relatively minor and inexpensive improvements that can be added to the list and done immediately, rather than deferred, that could add luster and value to the property. Focus on first impressions. A good positive initial impression can be worth a significant amount of money. The parking lots should be well lit and clear of litter, the lobby should be bright and well maintained. There should be fresh flowers and fresh newspapers, in addition to well-dressed, professional and courteous staff members.

There are several very substantive areas that a property owner should examine to determine whether or not the hotel is meeting the industry standard.

Reviewing your competition, both in terms of operations and comparable sales is essential to understanding your property's valuation. Also, you should consult with several brokers with hotel sales experience prior to choosing a broker and putting it on the market.

How do your room rates and occupancy compare with other local hotels? Are other hotels offering more amenities? Does the competition typically make conference rooms and ballrooms available for social and corporate functions or meetings? Income from professional meetings and conference rooms can significantly add to a property's value so it may be worthwhile to incorporate these into the hotel's package. Do you have space you could carve out for such uses? If the hotel currently accommodates corporate functions, determine whether or not the space is adequate or can be divided or expanded to accommodate the average sized corporate gathering.

Also, be sure all in-room and corporate amenities, from Internet connections to audiovisual systems, function properly. Sometimes increasing the size of an overhead screen or television can make all the difference between repeat guests and alarmingly negative experiences. The inability on one day for an executive to send or receive a fax, or check e-mail, probably translates into customers who will never return to that hotel.

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Guest Service: A Culture of YES

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