So, you’ve decided to sell your hotel. Congratulations! Now comes the hard part—actually preparing your property for sale. This can be a daunting task, because you not only want to get the best possible price for your hotel, but you also want to make sure that the sale goes smoothly and efficiently.
Here are a few tips on how to prepare your hotel for sale:
- Talk to your accountant about the tax consequence of selling your business. Depending on how your hotel is structured, you may be facing a significant tax bill. Additionally, you’ll want to be sure you understand how to save on capital gain taxes by using available avenues such as the 1031 exchange.
- Get your financials in order. One of the first things potential buyers will want to see is your financials. They’ll want to know how much revenue your hotel generates and what kind of profit margins you’re working with. This includes tax returns, profit and loss statements, balance sheets, etc. It is important to have these organized and readily available as they will play a big role in determining the purchase price of your hotel. So, make sure all your financial documents are in order before putting your hotel on the market. This will make the sale process much smoother and will give buyers confidence in your property.
- Make any necessary repairs or renovations. If your hotel needs any repairs or renovations, now is the time to take care of them. Potential buyers will be put off by any major problems with the property, so it’s important to address them before listing your hotel for sale.
- Clean and stage the property. When potential buyers come to tour your hotel, you want it to look its best. So, make sure to do a deep clean of the property and stage it in a way that highlights its best features.
- Investigate the property’s online presence. Are the websites related to the hotel current? Investigate the hotel’s online reputation and TripAdvisor reviews. Seller may also want to analyze the hotel’s competitive set, how it compares to the subject property and their estimated value range.
- Review contracts. There will be a due diligence period where the buyer’s attorneys will want to review all existing contracts. These could be vendor contracts, management agreements, food and beverage contracts, etc. It is in the seller’s best interest to have these reviewed by their own counsel prior to signing over to the buyer. This will help identify any potential issues that could arise during the due diligence period.
- Make sure the hotel is up to code. The last thing you want is for the sale of your hotel to fall through because the property does not meet current codes and regulations. This could include anything from the condition of the physical building to having the proper permits and licenses in place. Have your attorney or another expert in the field conduct a review to ensure that everything is up to code and in compliance.
- Hire a professional hotel advisor. Unless you’re experienced in selling hotels, it’s a good idea to hire a professional team to help you with the sale. Having a professional team in your corner will make the entire process much easier and will help ensure that you get the best possible price for your hotel.
Selling a hotel is a big decision and one that should not be taken lightly. However, if you are prepared and have gathered all the necessary due diligence, it can be a smooth process.
If you are thinking of selling your hotel, now may be the right time to act. The market is still strong, but there are potential headwinds on the horizon that could make it more difficult to sell in the near future.
For more information, please visit MumfordCompany.com.
Provided by G.R. Patel, CHO, CHIA, Mumford Company
