Key Questions When Buying Your Hotel

Buying Your Hotel– The Biggest Decision You Will Make – Part 2

(Buying Your Hotel– The Biggest Decision You Will Make – Part 1 – Here)

If the market is so important, what do you need to know?

The following is a quick guide to help you channel your thoughts. Follow it and you will probably be joining the top 5% or so of savvy hotel buyers.

1. Find Out Which the Markets the hotel is Trading In.

A successful hotel needs more than one market and will preferably have at least three sources of revenue.

Markets can include:
• Corporate activity created by people visiting local companies, government offices, local authorities or other business organisations.
• Conference and meeting activity generated by commercial or association activity. This demand may be generated by local, regional, national or international organisations depending on the location of the hotel relative to roads, airports, ports and stations.
• Exhibition and conference demand resulting from local specialist venues.
• Transport related activity at local airports, ports and stations, or from main roads/ motorways.
• Leisure related activity resulting from individuals or groups visiting local attractions, sporting venues, retail areas, places of historic or natural interest, holiday resorts etc.
• Specialist short break activity created by local features including walking or rambling trails, cycling routes, climbing, fishing, horse racing and the myriad of other sports and pastimes that people enjoy,
• Educational visits to local schools and universities caused by education related visitors, parents, companies seeking to promote their employment prospects,
• Hospital visits, especially close to specialist hospitals that require patients to travel further from their homes which requires the relatives to travel long distances to be near them.
• Social demand created by special events such as wedding receptions and other social celebrations. This market need not be based purely on the local population, some hotels and leisure venues are able to draw wedding receptions in particular from considerable distances as a result of the excellence of their facilities and settings.

Ask the existing operator which markets he/ she is trading in and whether there are records showing how many rooms each market creates a year – and the associated room rates charged.

2. Ask for details of major clients and try to find out how much they pay for their accommodation and how much business they brought to the hotel. Are annual contracts in place and at what tariff? Talk to client representatives – are they happy with the facilities and service offered?

3. Request details of room occupancy during the last year, preferably by day of week, and week of year. Look for periods of quiet trading.

4. If the hotel is over dependent on one market or, even worse, one client, can other markets be attracted?

5. Ask for details of past marketing activity, including copies of marketing literature and details of how the hotel has been promoted. How extensive was the activity? Are there gaps you can exploit? Can you match the activity previously undertaken? What can you do better? If the hotel was previously owned by a group, can you replace the business currently placed by the group’s central reservation and marketing system?

6. Look at the local/ regional area and identify where there may additional trading opportunities. Please refer to the earlier list of possible markets for a guide. Also consider the needs of the local population. Are there trading opportunities being missed by others?

7. Once you have identified which are the main markets for your hotel, ask yourself whether the existing hotel is catering well for the needs of these specific visitors. For example are restaurants trading at the right time and offering the right menus, are the bedrooms fitted out appropriately, could other facilities be added that would make the hotel more attractive – such as drying areas for walkers, better facilities for business people wishing to work in their rooms etc. Once you have identified changes, cost what it will take to make the necessary changes and any additional operating costs that will be created as a result.

8. Visit competitors. Consider how competitive your potential new hotel is in terms of facilities, price, service, standards and location relative to the main markets you are seeking to cater for.

9. Consider how you can raise the average revenue per room, either by increasing occupancy, the average tariff paid by room or both.

10. Consider whether you can add additional facilities or services such as more meeting rooms, a leisure club, spa, additional bar restaurant, or re-style existing facilities to make them more attractive. If adding additional facilities will there be a knock-on to other areas of the business that may cause problems. For example additional rooms may put a strain on the reception, the restaurant or the car park. Can this be managed effectively?

11. Review the services available from hotel marketing consortiums and local marketing associations. Consider how they can help you increase revenue. Is the internet being used to best advantage?