Selling a hotel in the current market
You only need to look on the websites of any of the major agents that deal with the sale of hotels, guesthouses and restaurants and it is immediately apparent that there is a lot on the market at the moment. In addition, there are many operators who would also be keen to sell but don’t wish to go to the open market due to fears that it will damage the business.
Locally, at the smaller end of the market transactions are often dependent on the sale of a property and the government’s support in the housing market may help to stimulate some growth at this end of the market. However, banks remain sceptical about supporting new operators entering the industry so supply appears to be outstripping demand. This is particularly an issue within the Lake District National Park as property is so expensive.
A further issue is the valuation of many of the businesses that are for sale as these often fail to take account of the fall in valuations throughout the sector and the oversupply in the market. Valuations at the smaller end of the market are generally arrived at by comparison with similar property on the market and are perhaps more akin to the valuation of a residential property. It is unpalatable to many operators to realise that valuations for less desirable properties have fallen quite significantly in the last 2-3 years and much of the property that is selling is of the higher quality.
At the larger end of the market hotel valuations are based on more traditional methods using multiples of turnover or profitability to arrive at a valuation and it appears that decent property at this end of the sector remains desirable to experienced operators.
To get the maximum value for your business you need to be able to show the purchaser that you have a good viable business and this needs to be reflected in your accounts. It must be remembered that purchasers seldom pay significant amounts for potential, particularly when there is a lot of supply. It is therefore important that you choose to sell at the right time as you need to be working the business as hard as you can in the run up to a sale if you want to get the best price possible.
Many thanks to Haydn Spedding of Colliers International in assisting with the preparation of this blog.
If you would like further information on this topic, please call Colin Johnson on 01539 729727.