Advice for Buying and Selling a Property04th December 2018
Michels & Taylor is renowned for being a sought-after hotel management company. Clients trust us to assist in the acquisition of a property as we are a specialist team of hotel experts.
We offer a wide range of support services including acquisition-related due diligence, feasibility study and business planning. For this reason, in our latest blog, we are sharing expert advice for identifying a property you wish to purchase, as well as the process behind buying and selling.
Identifying a property
You have identified a property that is of interest – now you need to evaluate the current EBITDAR of the property to see if it could be a viable asset. This process or formula takes into account earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs. It is a non-GAAP tool that is used to measure a business’ financial performance, which for a hotel is a lot more complex than many other businesses.
This usually involves looking at a vast amount of statistical data and in line with the business plan, analysing or building projections for future years. A high risk investor might buy the property during a period of low income, with the view to turning the property around, or a low risk investor will purchase the asset at a time when the brand or property is already strong and established. At Michels and Taylor, we have an experienced team ready to run the numbers and create financial models to advise on all scenarios – bespoke to the investors’ ambition; whether a single asset or portfolio of hotels.
Undertaking full hotel and competitor analysis is a vital next step in the process. Competitor benchmarking starts firstly by identifying the hotel’s positioning and then selecting a comparable set of hotels to measure performance against. By considering all revenue streams and demand in the area, you can then start planning optimum packages and rates to attract more guests, whilst exploring the likelihood of partnerships in the area too. An often-overlooked consideration is to compare the strength of the hotel’s website, whether it is part of a brand and if it has a presence across all online channels. Online Travel Agents (OTAs) can command a high commission, and if you take into account the strength of online exposure in its entirety, not just brand terms, Google ads or SEO optimisation, there could be a strategy waiting to be explored. We strongly suggest searching for the property to see what PR articles come up. This is so you can evaluate the positive/ negative press balance, and identify any issues early on. The same can be evaluated to understand the customer sentiment through online reviews for both the subject hotel and its competitors.
The Current Team and Offering
If you are looking to purchase a new property, then it is worth taking the time to look at the current team and offering. Set aside some time to look at the CVs of the senior management team – ponder their expertise, their weaknesses, their track record of goals and deliverables. From there, you can look at all the information you have gathered and decide if there is scope to increase bedroom stock and increase rates. Calculate what the current occupancy is running at, and by utilising the aforementioned EBITDAR you can make changes to see an increase in revenue, as well as looking into a CAPEX strategy in order to increase room numbers or sizes to maximise revenues.
We hope this blog has been useful. The steps can vary and be applied differently for each property depending on brand and the area it resides in. Despite there being no set rules, M&T are available to utilise many years of knowledge in the industry. We can assign a dedicated team of experts, who cover specialist areas of commercial, finance and property to help you with these decisions.
To find out more about how our advisory or hotel management company can help you with your purchases, contact us today.