Does the Season and Economy Affect Hotel Sales?

Hotel sales, or the buying and selling of hotel property, is a large part of the leisure category of the commercial property industry. The leisure property industry can be profitable for a property owner or investor, however, several factors should be considered when buying or selling a hotel.

Hotel Sales and the Seasons

To successfully buy a hotel, an investor should carefully consider the timing of a hotel purchase. A typical hotel purchase takes approximately 90 days from the execution of a sales contract to closing. Most hotel income seasons are in the summer months, so the purchase of a hotel should be timed such that the summer sales season generates enough income to carry the building through the slower winter months.

As the initial investment will be significant, it is important to remember that throughout the slow season during that first year, the hotel property will still need to cover operating expenses, taxes, mortgages and any other capital expenses. Income in this period may be limited due to the seasonality of a given location.

Hotel listings for sale also require consideration of timing. As buyers will want to take ownership at the beginning of the busy season, it is important to keep this in mind when listing a property. Many hotels sales are initially listed during the slow months, knowing that the completion of the sale will take about 90 days, once a buyer is located.

Therefore, hotel listings in January  should culminate in a successful closing by the beginning of the busy summer season. And during the winter holiday season from November until after the New Year, many hotel sales support personnel, including corporate franchise staff and bankers, also take time off, which can delay the closing process. Therefore, the first of the year is a great time for new hotel listings to appear.

Hotel Sales and the Economy

The state of the economy can play a part in hotel sales as well. Some questions to consider when contemplating hotel sales are:

• How is the economy affecting my clientele?
• Are my consumers primarily tourists or business travelers?
• How will a downturn or uptick in the economy affect my hotel’s profitability?
• Are there pending changes in the tax laws, including capital gains taxes, that should be considered?

Navigating the ever-changing economic waters of the hotel sales industry requires the guidance of an experienced hotel brokerage. Southeast International Hotel Brokers touts 50 years of experience in the hotel brokerage industry and stands ready to help buyers and sellers make the most of their hotel property. As the Midwest’s leading hotel brokers Southeast International can help you navigate these waters smoothly and confidently. Contact us today at (417) 865-2520.