What You Need To Know About Hotel Financing

The only time buying a hotel is easy is when you’re playing Monopoly. Purchasing a hotel in real life can be complex, especially if you don’t have or don’t want to put all the cash up front and need to request hotel financing.

A busy hotel always has plenty of cash flow, but there could be equal or even greater costs, everything from payroll to regular internal and external facility upkeep.  A hotel with a restaurant/bar also has higher costs.

Plus, in some cases, properties on the market, especially ones with attractive prices, may not be in great financial shape even before you take possession, requiring you to focus on fiscal stability first even before you start seeking ways to improve overall operations and efficiency.

If you want to start exploring options for hotel financing, focus on the following questions:

· If your hotel is part of a franchise, discussions can take place with the parent company about any expectations or requirements of all franchisees. As the new owner, you’ll want to find out whether you need to establish a new contract with the franchise owner or continue the existing one. This also can depend on the past owner’s relationship with the franchise holder – and could even contribute to why they decided to or needed to sell.

· When coming into an existing organization, some new owners may consider eliminating the existing staff and start with a new crew, especially if the staff contributed to its poor financial status. But hiring and training people could potentially take weeks, something that doesn’t work for an organization that has daily activity. Instead, consider keep the staff, at last in a transition period. You may legally consider firing the manager, however.  This move also could require discussions with your lender and with any franchise agreements signed by the current manager.

· Look closer at the hotel’s financial processes, especially where and how funds are audited and deposited nightly.

Overall, hotel financing can be an interesting option for people who either dreamed of being owners or are curious about different investments. For more details contact Wexum.

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