Wish are the basic due diligence that I should perform buying a Hotel?

In Buying Property - Asked by EVA H. - Nov 24, 2008
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Answer(s)

Phillip M.
Appraiser
Lakewood, CO

Review the trailing financial statements. Look at monthly P&L to determine peak and off peak, review daily room revenue reports to determine peak and off peak days of the week. Compare changes in ADR compared to occupancy to determine the impact of the current revenue management model. Review the current and historical STAR reports to determine if the property is gaining or loosing market share and why. Review corporate accounts to determine percentage of revenue from each account, Complete a physical inspection of the property to include all major systems, public areas, and rooms. Review the title work for any exceptions, review the survey for easements, verify zoning compliance, and check for proposed changes to land uses in the area. Review the Dodge report to determine new supply of rooms coming on the market.
If a flagged hotel, review the franchise agreement, determine the transfer fee, review the transfer PIP, review the Quality Assurance reports for the past several years, review the most recent QA report for outstanding PIP items. Get a list of all vendors and determine from each the process to transfer accounts and deposit requirements if any. Review all leases and service agreements for leased equipment. Review any leases or agreements that are in place for the property. Review accounts receivable and determine how these will be handled upon transfer. Review the payroll report to determine current salary and any earned, but not yet paid, compensation such as vacation, sick days etc.. There are some additional items that would be property specific, but that covers the big items. Call me or email me with any questions.
Phil A. McDonald
Marcus and Millichap
National Hospitality Group
1225 17th Street Suite 1800
Denver, CO 80202
720-217-6600 Cell
888-680-1946 Fax
www.ColoradoHotelBroker.com

Nov 25, 2008
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Chris S.
Broker/Agent
Coeur D'alene, ID

Average daily rate of the your property and the competition
Average occupancy of your property and competition
Cost to build new (barriers to entry/new competition)
Any proposals for new competition in the market
Deferred maintenance
... and much more. If you aren't already working with a qualified commercial broker, find a good one in your market.

Jan 5, 2009
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