Selling a hotel or motel

Hotels are underwritten as real estate whose value depends on operating performance. Occupancy, average daily rate and the resulting RevPAR set the income; the franchise agreement, the property improvement plan obligation and deferred capital determine what a buyer must spend before that income is secure.

Written and reviewed by Antoine Campbell. Last reviewed .

Performance and the competitive set

  • Occupancy, average daily rate and RevPAR by month over three years
  • Performance relative to the local competitive set
  • Demand mix: transient, corporate, group, contract, extended stay
  • Booking channel mix and the cost of each channel
  • Seasonality and the shape of the low quarter

Franchise agreements and PIP

For a flagged property, the franchise agreement governs the transaction as much as the purchase agreement does. Transfer requires franchisor approval, and approval usually comes with a property improvement plan specifying required renovation work and its deadline.

The PIP is a capital obligation that arrives with the keys. A price negotiated without a scoped PIP estimate is a price that will be renegotiated.

Property condition

  • Roof, HVAC systems, elevators, life safety systems and pool compliance
  • Guest room condition, soft goods and case goods age
  • Accessibility compliance under the Americans with Disabilities Act
  • Deferred maintenance inventory with cost estimates
  • Environmental and any prior remediation

Operations and staffing

Independent properties often run on an owner-manager who lives the job. Buyers need to know what professional management costs and whether the earnings survive that expense. Franchised properties have brand standards that dictate staffing regardless of what the current operation does.

What Maurant needs to evaluate this

  • Three years of operating statements and tax returns
  • Monthly occupancy, ADR and RevPAR history
  • Franchise agreement with remaining term and transfer terms
  • Any existing PIP or franchisor correspondence
  • Capital expenditure history and deferred maintenance list
  • Property tax, insurance and utility history

When Maurant is not the right buyer

  • Properties with a PIP obligation the income cannot support
  • Assets in markets with structural demand decline
  • Owners pricing on pre-renovation potential rather than current performance

Questions owners ask

Can I sell without franchisor approval?
Not for a flagged property. Transfer approval is part of the process and it affects the timeline.
How do you handle deferred maintenance?
It gets scoped, priced and reflected in the structure, typically through escrow or price adjustment.
Do you buy independent motels?
Yes, where the location and the income support it. Independent properties avoid PIP risk and carry their own demand questions.

Sources

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