How to become a hotelier

Q: This year we are hoping to become hoteliers and create our dream business. We’re not totally sure where to start. Any pointers for what we should be doing?

How exciting! Your first purchase is a big step and it can be a bit frightening, but the key to success is in the planning and research. What you need to do depends on whether you want to build a business from scratch, or whether you want to buy a going concern.

If you are buying a going concern, then the very first step is to mystery shop; go and stay overnight or longer if you can and spend time evaluating the business. Get chatting to the staff (but remember they might not know the property is up for sale) and have a friendly conversation about how busy they are, if they have a lot of regulars, whether they enjoy it and how long they have been there.

This will give a good indication of the health of the business and the likely work you will need to take on. Whilst you’re there (if it isn’t your local area), you also need to take time to examine the competition and see if you can find out lots about them too. Other places that give good information include the local Tourist Information Centre and Chamber of Commerce who will be able to give you a feel for the demand in the area.

Remotely, you also need to web-search to see what kind of profile the business has, what type of TripAdvisor reviews and whether there are any negatives. This shouldn’t automatically put you off buying, however it will give you an idea of what you will need to overcome, and whether you feel you can handle it in your first ever hospitality business.

Once you have done your research and are happy that you are making the right decision then you need a good solicitor and surveyor – if you don’t have one the agent might recommend one, but it’s also worth calling a few up to see who you gel with. The first stage in this process is to see get advice from the solicitor and get their help to establish the Heads of Terms – this will set out the basic agreed understanding for both parties and what they are agreeing to and are subject to.  

This particularly helps with a going concern as it makes both sides consider all the implications prior to the expensive surveys, drawing up of contracts etc.  You will need to agree how to manage/value the stock, how to pay off debtors, the transfer of deposits for future functions, what licences exist/are needed to transfer and also the staffing implications. You will need to seek advice from a specialist for this if you are taking on existing staff as something called TUPE comes into play.

Having completed this then the appointment of a surveyor is key, to help you establish what the condition of the property is, and therefore the realistic value of the property itself. They will also be able to advise you about any plans you have, to extend or alter the property in any way, whether there are any limitations for you doing so and how this will likely affect the value in the future. Once the survey is completed this should then be sent back to the solicitor who will then start the due diligence procedure to establish the ownership, assets and liabilities of the property and evaluate its commercial potential and start local authority searches.

Once you’ve done all that and decided to go ahead with purchasing the business, then you’ll need to spend the time between agreement of sale and exchange of the keys to pull together a plan for the business – what you want to achieve with it and when. You can also see if the current owners will agree to a handover period, working with you in person so that you can understand the existing processes, systems etc. Not all will, but this can be an essential insight if you can get it. Good luck.

This feature first appeared in the January 2016 issue of Hotel Owner.