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When buying a hotel business, avoid these mistakes

The hotel business is thriving worldwide with an impressive 550 billion U.S. dollars revenue expected to come in this year as reported by Statista. No wonder investors are so eager to devote their money to international hotel franchises. Dimitrios Kosvogiannis's world-touring has taken him all over the globe, allowing him to experience the cuisines first-hand. Dimitris Kosvogiannis has served in hospitality for 15 years. Much of his initial industry practice – and victory – came as Resident and Operations Manager at Couples Resorts.

An increasing number of entrepreneurs are turning towards the hotel industry when they think of buying a business.


It can be difficult to land a profitable deal if you are unsure of how to proceed. Here are some common errors to avoid when purchasing an existing hotel business.



1. Ignoring full disclosure


When you meet the seller, they will present a well-rehearsed pitch to entice you into purchasing their hotel. That's understandable but you should not allow future potential to cloud your judgment of the present. What matters, in the end, is the actual business you receive not what it could be in a couple of years. Make a point to focus on the liabilities that come with that purchase. Having facts and figures about essentials like rents, wages, employees, contracts, taxes, etc. will paint a realistic picture in your mind.


2. Neglecting due diligence


Never take the seller's word for it. It's not personal just business. Always ask for numbers outright but double-check them. It is your right to ask for proper documents and reports that depict the investments and cash flow of the establishment. Hire professional brokers, accountants, and lawyers who are experienced in handling hotel purchases.




3. Unprepared for a lifestyle change


It's always unwise to buy a business before understanding how it functions on a daily basis and your involvement in it. Hotels operate 24/7 so do not expect to be free on nights and weekends all the time. An excellent way to get accustomed to it is to come to an agreement with the seller about offering a free crash course in running a hotel.


4. Overlooking contracts


A hotel needs plenty of supplies so there are fixed contracts with vendors you must look into before closing the deal. Check the quality of the supplies and the reliability of the vendor. It is very important to ensure there are no overdue payments that may be piled on you because you were clueless about them.





5. Disregarding outstanding rent


There are often regular rental agreements signed by the hotel for daily supplies, furnishings, etc. So take an inventory of all the hotel assets and how many of them are rentals. Request a full history of those rentals to confirm none of the rent is still due to be paid. Such small expenses could pile up to create debts for you after you sign the deal unaware of them.


6. Not checking bookings


Apart from regular check-ins hotels hire out halls and conference rooms for corporate and private events. Take note of all the future bookings made by clients. These usually have advance deposits so you have to be certain all of those payments have been paid to you not the seller.



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