How to Buy a Hotel

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how buy hotel

The hospitality sector in the UK is thought to be worth between £100 billion and £130 billion (UKHospitality). Therefore, event planning, food and drink services and lodging provide many potentially lucrative business opportunities. Since the recession that began in 2008, it is thought that the hotel sector could have contributed almost £72 billion to the economy. This could be because many Brits are opting to go on holiday here in the UK instead of venturing abroad. Also, it is predicted that 40 million people visited the country in 2018 and international tourists are also in need of hotel business’ services. Whether it’s a budget hotel chain or luxurious boutique hotel, the need for hotels is at an all-time high.

Who is the hotel business right for?

Hotel business owners will need to be capable at catering for a mix of different people’s needs. Whether it’s business travellers or young families, each guest will have their own priorities and expectations. Of course, individuals will also need to possess adequate capital, but more on this later. It will also be beneficial to have experience in the industry too. Entrepreneurs should be sensible and not have unreasonable expectations to get rich straight away. They should also be respectable and eager to take part in a business venture they can take pride in. It’s a very hands-on job and can often involve unsociable working hours too, so be prepared for this.

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What is a typical day like for a hotel business owner?

The main responsibilities of hotel owners are to recruit and manage staff, negotiate room rates, complete paperwork and admin, manage financial obligations and keep up to date with the hotel market. Depending on the nature of your hotel business, you could be cooking breakfast one minute and filling out VAT returns the next, so ensure you thoroughly think about your role in the business and whether you fancy doing a bit of everything.

How to Start Your Own Hotel Business

Take a look below at some tips for buying a hotel business.

  • Location. Think very carefully about the location of the hotel. A hotel is likely to thrive in an area where the competition is not fulfilling all of its customers’ or potential customers’ needs. On the other hand, if you choose to buy a hotel in a town that is heavily populated with successful hotels with an existing customer base, it may be more difficult to attract customers and see success. A hotel in the centre of London will require a very different business plan to one in a rural area like the Scottish Highlands.
  • Think about your customer. Who is your target customer going to be? The hotel could be primarily business, leisure, or food and beverage-orientated, and you will need to develop a business strategy in accordance with this.
  • Speak to an expert. Seeking help from a specialist hotel advisor can be incredibly beneficial. This also includes accountants and lawyers to talk through the investment with, as well as architects, valuers and surveyors to make sure that the building you are buying is fit for how you intend to use it.
  • Craft a business plan. Once you have considered the above factors, you need to create a business plan that covers your short and long-term objectives. If you need to source capital to secure or develop the hotel business, then this plan will need to be completed before you can buy the hotel. The plan should be simple, clear and persuasive enough to convince lenders or investors that you have the ability to run a profitable business. Investors won’t take fondly to a badly organised and articulated plan.
  • Analyse the competition. Examine what the local market desires by analysing other local hotel businesses. This should outline gaps in the market that you can capitalise on or demand for what you are offering in that area.
  • Think about revenue streams. When buying an existing hotel, you need to research the current daily rate, how many guests can stay there and how revenue is split. By offering a few strong revenue streams, you can help secure your business if there is a dip in part of the trade. Therefore, if numerous aspects of the business can be developed or made more profitable, this is a great sign.
  • After you’ve renovated the hotel, you can focus on recruiting and training your staff. Then you can buy the necessary systems, such as accounting software and reservations systems, if they aren’t already in place. Also, you can launch your hotel reopening marketing plan to get the word out there and entice customers. This could be through social media, the local newspaper or a great website.

How much does it cost to buy a hotel franchise?

It is estimated that it will cost around $2.5 million to set up a medium-size hotel in the US. However, if you are looking to start a large-scale hotel business that is five star and includes more advanced facilities, you are looking more towards the $5 million mark. In the UK, you will need roughly £2 million and £4.5 million respectively. This includes costs like legal expenses, marketing and promotion, business consultant hire, operations cots, location lease, hotel remodelling, start-up inventory and machines, CCTV, website, etc.
However, if you want to buy an existing hotel franchise in the UK, the average cost is £50,000. Three big hotel franchise companies in the UK are InterContinental Hotels and Resorts, Choice Hotels Europe and Radisson Blue Edwardian Hotels.

To get more information on hotel franchises and the benefits of running your own, head to our hotel franchise opportunities page. You can also find out more about the Travelodge franchise which is currently looking for franchisees here on Point Franchise.

>> Read more articles on the Hotel sector

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