Looking for a hotel? First, make sure it’s in the right place…
I’m thinking of buying a hotel but I’m not sure where. What’s the first thing I should consider?
It may sound obvious, but it’s very important to decide what part of the country you want to be in. Remember that the right location doesn’t just depend on where you see the right business but also on your life away from work. If you have family commitments, you won’t want to be running a business in the north if you have to travel south to see your family. In the short term at least, you are likely to be tied to the business 24 hours a day, seven days a week.
Decide what type of hotel you want to run and use the style of operation to shortlist the type of locations you want. For example, you would not set up a trendy boutique town house hotel in an area with little commercial business that cannot support the room rates you want to charge. Likewise, if you are looking for a business that can operate all year round you would not necessarily buy a hotel in a seaside resort. Most competent operators look to be in or close to areas with a good spread of people.
So location is the most important thing?
When it comes to finding the right hotel, the old maxim is "location, location, location." Visibility is important for passing trade, but these days you must consider a new adage for the hospitality business - "service, service, service." Buying a hotel on a main road is not critical - if you are good people will find you. There are very few well run businesses in so-called secondary locations that are unsuccessful. However, there are unsuccessful hotels in good locations that are badly run.
OK, so I know where I want my hotel, what’s next?
Once you have decided on the "macro" location, i.e. which region you want to be in, consider the "micro" location. Is your prospective hotel on the right side of town? If it isn’t now, will it be in the future? Is the area expanding in the future? Check with the local council to see outstanding planning permissions or applications. Is there commercial expansion in the area that will help you increase your business over the next couple of years? Also check for any planning proposals that might threaten the business - is there a brand new budget hotel planned locally that could affect you?
I’ve found a hotel I think may be just what I’m looking for. What other factors should I be considering?
Once you have found a hotel you want, put together a comprehensive list of questions that will help you decide whether the business you are buying is the right one. For example:
- Where do most of the customers come from? Does 75% of the profit come from one local company that may close down?
- Is there space available to expand the business?
- Is there obvious scope to improve or enhance the business, such as adding a restaurant?
- What is local competition like?
- Why is the owner selling?
- How much has been spent on the hotel in recent years?
A competent solicitor will assist with legal planning issues and a good accountant or consultant experienced in the hotel industry will help compile your list of questions.
Any other advice before I sign on the dotted line?
Decide whether signage is important to the hotel. If you’re on a main road and dependent on passing food and beverage trade it probably is. If you buy a townhouse with little passing business then it’s probably not so important. In any event, any proposed changes to signage ought to be agreed in principle with local planners.
When asking the local council about any prospective planning proposals in your area, always ask if there are any plans to alter nearby road networks. If you will be relying on passing trade, a new by-pass, for example, can close a business.
Produced by CatererSearch in association with Christie & Co