Hotel Pricing Factors
Buy a Hotel: What Affects the Price of a Hotel?
When you are in the market to buy a hotel, there are plenty of things you must consider when looking. Of course, this is something that Southeast International Hotel Brokers will guide you through, but understanding the factors that affect the price will make it easier to maneuver through the process.
The five main factors that affect pricing when you buy a hotel are:
While it’s obvious that you don’t want to buy a business that has been run into the ground, the level of success of the hotel that you look for depends on what you want to pay. Buying a successful hotel that has great profit margins is an obvious way to have a sure return on your investment, but it also means that your purchase price will likely be much higher.
Income greatly affects value. Likewise, this means that if you have great faith in your ability to come in and turn business around, you might want to buy a hotel that isn’t currently as successful to get it at a bargain price. This way, there is more risk involved, but if you can get the hotel thriving again without having to invest a lot in the property, you’ll be on the road to success.
The age of a property will have a serious bearing on the price as well. However, it’s not a cut-and-dried guarantee that either way would be better. Age itself is a factor, but it can also tie to other variables. For example, an older property may be more well known and have a more steady flow of repeat business. The downside is that an older property has a higher cost of maintenance and is probably more at risk of needing renovations or updates.
A newer hotel might not be as well known, but the draw of it being a new place could be an attraction for guests and maintenance costs would most likely be much less.
3. Property Condition
This one speaks for itself. A property in great condition will have a higher value. If you buy a hotel that is in rough condition, the purchase price might be less, but there will be a lot more investment funding required for renovations and updates.
4. Market Saturation
Supply and demand is everything and the hospitality industry is no exception. The more common the hotel listing, the less value is assigned to it.
Most would assume that a popular metropolitan area or close to a tourist attraction would be the best location to buy a hotel, but this is not necessarily true. In areas where hotels are a dime a dozen, the competition is much more stiff. Buying a hotel in a suburb or more rural area can be just as or even more profitable, if the location is along a well-traveled highway and has amenities nearby.
At Southeast International Hotel Brokers, we have decades of experience as hotel brokers and can help you navigate through hotel listings. We will use our knowledge and experience to weigh these factors and find a deal that matches your budget and needs.