Sell Your Hotel Faster, and For More Money, by Providing Seller Financing

By Mike Handelsman Group General Manager, BizBuySell.com | June 06, 2009

There's nothing more frustrating than a listed business that attracts a lot of attention, but no buyers who are willing to seal the deal. Unfortunately, that's exactly the situation many hotel owners are facing in today's marketplace.

Most of the time, the hotel isn't the problem. In fact, a business that generates significant attention in the marketplace is usually a good candidate for a sale. Instead, the issue is most often the buyers' inability to secure financing at the owner's asking price. That leaves owners with two options: Either lower the asking price or work with the buyer to overcome sale barriers.

A seller's willingness to finance at least part of a business sale has always been a strong selling point for buyers, but in recent months it has become essential. With many potential business buyers unable to access the necessary funds from lending institutions, hotel sellers who decide to offer seller financing are likely to have much more success selling their business than those who do not.

While it sounds like a no-brainer for hotel sellers to offer financing, they should be careful not to do so unprepared. When making the decision to offer financing, there is a great deal to consider and research in order to help ensure a successful, smooth process. To stay on track, sellers need to follow some obvious - and some not so obvious - dos and don'ts.

Can seller financing be risky? Absolutely, but under the right circumstances it can also be a financial boon. If financing the sale of your hotel sounds like a good idea, don't make another move until you've carefully considered the lessons being learned by other seller-financers.

Evaluate the Risk

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The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.