Hotel Investment Sales

Hotel, hospitality and tourist investment sales are experiencing remarkable development even thanks to the presence of many international operators and investors who see Italy as a key tourist destination.

The total number of hotel properties in Italy is very high and presupposes concentrations especially for those tourist destinations that attract foreign flows. In fact, more effective accommodation units with a high number of rooms are arising against many small structures.

Sales are therefore destined to increase, especially because many hotel entrepreneurs have to face agenerational change in their own companies and many structures require relevant investments for the renovation of the building and installations.

The sales process can be directly adopted by the owner or supported by companies and real estate advisors that manage the whole hotel commercialization process towards the market.

The process often arises from the sellers’ need to complete their investments, reduce the number of owned structures or sell a property which is no longer in line with the investors’ needs.

In all these cases, there are some models that can be adopted for an effective commercialization.

In fact, the commercialization process is the following:

1. Preparation of an Investment Brochure, otherwise called Information Memorandum, through which it is possible to gather and present features of the accommodation structure, sales objectives, owner’s expectations towards the transfer and possibly indications of expected price (so called Asking Price)
2. Preparation of a buyers’ list (so called Investor List) that contains all the potential subjects interested in acquiring the structure, considering the type of hotel product and the nature of investment.
3. Commercialization of the investment opportunity through commercial actions addressed to the market of national and international hotel investors and operators. Such actions aim at communicating sales opportunities, how the sales transaction takes place and the property expectations according to the sale price
4. Arrangement of the opportunity Due Diligence, gathering and availability of technical, operative, accounting, economic and financial documents of the hotel structure and the company owner of the real estate
5. Negotiations with investors and following preparation of a short list, namely a restricted list of buyers with which to maintain more advanced negotiations
6. Identification of the Sales Term Sheet, through which the hotel owner wants the main contract terms in the sales agreement to be respected
7. Selection of the most apt buyer to complete the sales: through such activity the most suitable subject to negotiate the term sheet is identified, entering a final phase of negotiation
8. Signature of the Term Sheet and inclusion of the legal parties in the negotiation: in this last phase, their respective lawyers are included in order to draft the sales agreement and finalize the contractual relationship of hotel transfer.

The total duration of the process may vary from few months to even more than a year, according to the different parties’ degree of involvement, the seller’s and buyer’s motivation and the conditions of financial markets.

Therefore, the process is composed of many iterative phases in which the investor or the owner make sure that the hotel is managed according to investment expectations. This generally implies the evaluation of market conditions, the need to renovate, refinance the property or propose its sale.

In such case, the owner can decide to conclude the investment and sell the asset. Even if this has to be included in the general process of hotel asset management, the decision is often affected by contingent circumstances that arise at a certain moment of the hotel life cycle and different market conditions. The most sophisticated investors always evaluate the possibility of maintaining or selling their own assets, estimating future cash flows and related risks, according to different alternative investment opportunities.

Generally, the sales brokerage service offered by brokerage and advisory companies is paid with a variable remuneration depending on the price achieved at the end of the sale.