SELLING A HOTEL
Do you want to sell a hotel?
What’s the best price I can get for my hotel?
The price is determined by the market, i.e., how much buyers are willing to pay for the hotel. But if you present them with the right information, the negotiations will be more effective.
To determine the correct price, we need to estimate the market value.
At JAN Hospitality we use up to five comparative methods to determine market value:
- future hotel revenues
- occupancy history, if known, average daily rate history (ADR) and costs
- green-field (replacement cost) method
- lease income method
- sale price by unit, for example if each room was one small apartment, how much could it be sold for
Who will help me get the best price? Can I do it myself or do I need a professional advisor?
A professional consultant or agent can:
- find buyers who are interested in buying the hotel
- help with a professional estimate of the market value
- provide impartial expert advice based on market experience and knowledge
- advise on tax, legal, accounting, personnel and operating issues
- prepare a sales brochure with all the crucial information
- conduct negotiations on the conditions of the sale, in particular the purchase price, in favour of the seller
- find solutions for even the trickiest situations
- bring the transaction to a successful conclusion – payment of the purchase price and handover of the hotel to the new owner
Where can I find such a person?
A professional consultant must have experience in the hotel industry and at the same time be a good broker, who understands the sale of real estate and commercial companies.
Selling a hotel is such a complex and complicated matter that we strongly recommend using an agent. We recommend choosing someone who
- demonstrably knows the market
- has experience in the hotel industry
- has mediated the sale of at least a few hotels
- has a good reputation in the field
- you find congenial
When selling you need to see manifold ROI on the money spent on an agent
Should I sell the company shares or the property?
Both options have their advantages and disadvantages: If a hotel property is owned by a company, it’s usually best to sell the company. What are the main differences?
Sale of the company (share deal)
- If you are selling a company that you have owned for more than 5 years, you are not obligated to pay any income tax.
- Protecting employees. If you have hotel employees employed by the company, the employees are automatically transferred to the new owner with the sale of the company.
- When selling a company, the buyer must conduct a thorough check of all documents going back few years (due diligence). The due diligence process can take from several weeks to months.
- Another form of sale according to the new Civil Code is the “sale of a plant” – so, for example, the buyer can buy the hotel as part of the company, while the original company remains in the ownership of the seller.
Sale of the property (asset deal)
- Buyers usually prefer an asset deal. Because a real estate property can conceal virtually no legal or factual defects that can’t be found.
- As due diligence is not conducted, the entire sale process moves more quickly by weeks or even months.
- The sale of real estate property is safer for the buyer. The buyer pays a property transaction tax of 4% of the purchase price.
- If the seller (as a private person) has owned the property for more than 5 years, it is exempt from income tax.
Where can I find a buyer?
Finding a solvent buyer is perhaps the most difficult step in the whole process. This requires developing a top-level marketing plan, setting a target group, preparing sales materials and having good contacts.
The main sales materials you will need are:
- an information brochure for interested parties
- a description of the state of the property
- operating costs
- business results
- development potential
- floor plans
- an extract from the Land Register
- a zoning plan and other restrictions
Finding suitable buyers and presenting them with this investment opportunity takes tens to hundreds of hours of administrative work and preparation. Our elite database of clients and ability to explain intricate matters streamlines this process.
This needs good contacts in the field, the agent’s reputation, and ensuring the information provided is relevant.
CAUTION! This is not a job for just a real estate agency that sells the hotel based on sale price per sq. meter, like if it was an apartment.
How long will it take for the money to be in my account?
From the moment you decide to sell your hotel, you have to count on the following phases of the sale:
- preparing of an estimate of the market value and finalizing an agency agreement between the seller and professional agent (2-4 weeks)
- getting the hotel ready to be sold, taking photographs, and securing the necessary documentation and creating a sales brochure (2-4 weeks)
- conducting an inspection with the clients and finding a solvent buyer (the time cannot be precisely predicted here, however 3 to 12 months should be expected)
- securing financing by the buyer (1 – 2 months)
- concluding the purchase agreements (2 weeks)
- for the asset deal, it takes about 1 month to register the transfer in the Land Register, for the share deal, this is a matter of one or two days, including the convocation of a general meeting