Factors such as investment capacity, location, and the business strategy for the new property—combined with effective management—are some of the key factors that influence the decision to purchase a hotel. We will analyze them below.
Last year, the hotel sector in Spain set a record with an investment volume of 4.9 billion euros, representing a 33% increase over the previous year. This boom thus caps off an extraordinary five-year period driven by excellent growth in tourism. In line with the general trend, in the case of our country, developments in the area of investment The reason for this can be traced to the economic impact of the crisis in 2013, after which a considerable improvement began to be felt in the sector, leading to a very favorable period for investment.
The figures recorded in 2018 rank Spain as the second-most important destination for hotel investment in Europe, trailing only the United Kingdom and surpassing major countries such as Germany, which positions our country as a key destination for qualified investors.
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Why Buy a Hotel?
The outlook for the next two years is optimistic regarding the continuation of this upward trend in hotel investment, since—despite the emergence of new alternatives in the sector—hotels remain the flagship of the lodging industry.
Consequently, when developing strategies for a new hotel project, two approaches emerge. First, undertaking the construction and opening of a new property; and second, purchasing an existing hotel already managed by another owner. For both smaller buyers and larger hotel chains, the pressure stemming from the need for global growth has meant that the purchase of an operating hotel, followed by its renovation and brand differentiation, has been crucial to bringing their projects to fruition.
Investing in the acquisition of an operating hotel is a process that requires careful planning, analysis, and consideration to ensure that our investment achieves the level of success we hope to attain.
What do we want to buy? Do we know our goals?
These are some of the questions we should ask ourselves when investing in hotels that are already in operation.
Key Considerations When Buying an Operating Hotel
Analyze the investment. Conduct research to comprehensively analyze the type of investment you intend to make. We will need to analyze the business’s financial situation, as well as the successes, failures, and current status of the selling company before making our hotel investment. We will need to develop a financing plan to carry out our business and explore investment partnerships or the involvement of investment funds, if necessary.
Expert advice. Buying a hotel is a major business undertaking, and we should always seek the help of experts and experienced investment managers to analyze the financial, legal, and administrative aspects. It is essential to outline the future plan we have in mind for our new hotel brand. This will allow us to make the most appropriate decision at the right time.
Pre-Opening Plan
A plan developed to prepare and position the future establishment, which will largely determine its success or failure in terms of market positioning. The tasks outlined in this plan are organized into Human Resources, Marketing, Financing, and Inspections and Categorization.
Research the destination
This will be decisive for the profitability of our investment. If the location of the property we wish to acquire is performing well, the best option will be to purchase an existing hotel. This is the case in established tourist areas where there is no need to stand out with a new project. If the buyer is seeking to stand out in an area that is yet to be developed but has potential, a branded and distinctive project is needed—which would typically involve a new property.
Legal Considerations Before Buying a Hotel
Keep in mind that the hotel we want to buy isn’t starting from scratch. We’ll need to analyze the financial aspects and licensing requirements and ensure that—regardless of the business strategies, brand differentiation, or customer-focused approaches we plan to implement in the future—the necessary conditions are in place so as not to hinder our new brand. We’ll need to analyze its position relative to the competition and gauge customer and community sentiment toward the business.
Target Audience and Customer Profile
When making a hotel investment, understanding the typical customer of the property we intend to purchase is crucial for developing our new business objectives, marketing strategies, and hotel branding, rebranding, or brand repositioning policies.
Category
The possibility of upgrading the property’s classification following a purchase and renovation is also an added value. The buyer will take into account the initial investment required to achieve this upgrade.
Buying a Hotel: Challenges We Face
Differentiation and creating a new image are, without a doubt, the main challenges facing a new hotel and key to becoming a premier establishment that adapts to the client’s needs, goals, and budget. In short, the hotel project we’ve been dreaming of.
Based on all these results from the past year and the optimistic outlook for the sector, we can conclude that hotel investment is a profitable business. It is a process that should be managed by a professional consulting firm. At IHCS, we can advise you throughout the entire process of purchasing a hotel and help make your project a reality, ensuring it achieves the success it deserves.
