Food, Retail & Hospitality · Buyer guide
Buying a Hotel & Motel business
Published · Reviewed by The Diligence Standard Team · Updated
a Hotel & Motel can look attractive on a summary P&L while the operating details underneath it change the cash flow, transferability and capital a buyer will actually own. Diligence should connect the reported earnings to the business-specific drivers that create them.
How the business works
Occupancy, ADR, RevPAR, channel mix, property condition and management labor determine cash flow; deferred property improvement can dominate value.
Risks to test
- Deferred PIP/CapEx
- OTA dependence
- Seasonality
- Property condition
- Management replacement
- Franchise requirements
Evidence to request and reconcile
- PMS reports
- Channel mix
- Payroll
- CapEx/PIP
- Franchise agreements
- Property inspections
Decision questions
- What PIP or renovation spend is required?
- How much demand comes from OTAs?
- What is normalized occupancy/ADR?
- Who operates the property daily?
- What franchise obligations transfer?