Most owners think of their hotel as one business. Buyers see two: a building and a trading operation, stapled together by whoever happens to own both. Almost every difficult moment in a hotel sale traces back to that split — which of the two a particular buyer actually wants, what each is worth on its own, and what happens to the paperwork holding them together when ownership changes.
Get that framing right and the process is orderly. Get it wrong and you spend six months talking to buyers who were never going to bid, while the ones who would have paid most were never approached.
This article covers how buyers separate property from operation, what the brand or management agreement does at a change of control, why deferred capex costs more than it saves, and what an owner should fix in the twelve months before going to market.
The first question in any hospitality process is what is actually being sold: the freehold with the business as a going concern, the operating business alone under a lease, the property alone with a tenant in place, or the shares in a company that holds some combination of those.
Each version attracts a different buyer and a different price. A property investor is buying an income stream secured on bricks, and cares most about lease length, covenant strength and the building's condition. An operator is buying trade, and cares most about RevPAR, cost base, staff and brand. An owner-operator wants both and will pay for both, but is a smaller pool and usually more price-sensitive because they are funding two things at once.
This is also where sale-and-leaseback enters. Splitting the asset — selling the building to an investor and the operation to an operator, with a lease binding them — can raise more in total than selling the combined package, particularly where the property is strong and the trade is ordinary. It is not automatically right: the lease terms you sign become the operation's largest fixed cost forever, and a rent set too high to flatter the property sale will destroy the value of the business sitting inside it.
The right structure depends on where the value actually sits. Establishing that before any approach is made is the single decision that most changes the outcome, and it is where Conclave Partners begins a hospitality mandate.
If the hotel is branded, franchised or run under a management agreement, that contract is the second thing a buyer reads, and it can constrain the deal more than anything in the accounts.
Franchise and management agreements almost always contain change-of-control provisions. The brand may have consent rights, approval rights over the incoming owner, or a right of first refusal on the sale itself. A right of first refusal is not fatal but it changes the process, because every bidder knows their offer may be used to trigger someone else's option, and some will decline to bid at all rather than do free price discovery for a franchisor.
Consent usually comes with conditions. The most common is a property improvement plan: the brand's list of works required to bring the hotel to current standard, agreed as part of approving the new owner. That plan is real money, it lands in the buyer's first two years, and a buyer will deduct it from what they pay you almost pound for pound. A seller who has never asked the brand what the PIP would look like is negotiating blind against a number the buyer already knows.
The practical preparation is straightforward. Read the agreement's remaining term, termination rights and liquidated damages on early exit. Ask the brand, in writing, what happens on a change of control and what works they would require. And model the deal both ways — branded and unbranded — because for some hotels the honest answer is that the brand costs more in fees and PIP than it delivers in rate.
Hotels absorb underinvestment quietly. Occupancy holds up for a while, guests grumble in reviews before they stop coming, and the profit and loss account looks better every year you do not replace the bedrooms. Buyers know this pattern intimately and hunt for it first.
They inspect room condition against the standard the rate implies, ask when roof, lifts, boilers, kitchen equipment and air conditioning were last replaced, look at the refurbishment cycle by floor or wing, and compare reported capex to a normal reserve for a property of that size and class. Where it sits well below normal, they treat the difference as a debt owed to the building and subtract it.
Energy performance has now joined that list as a regulatory item rather than a discretionary one. The recast Energy Performance of Buildings Directive entered into force on 28 May 2024 and requires Member States to renovate the worst-performing 16 per cent of non-residential building stock by 2030 and the worst 26 per cent by 2033, with national minimum energy performance standards defining which buildings fall into those bands; Member States had until 29 May 2026 to transpose it. Hotels are energy-intensive non-residential buildings, so a poor performance certificate is no longer just an operating cost — it is a dated obligation a buyer will price.
None of this argues for a panic refurbishment before sale. Money spent in the last twelve months rarely returns its cost in the price. It argues for something cheaper: a documented capex history, a costed forward plan, current certificates, and honest disclosure. A buyer who can see the number stops imagining a bigger one.
Absolute performance means little in hospitality. What matters is performance relative to comparable hotels in the same market, and buyers benchmark it as a matter of routine.
They will look at occupancy, average daily rate and RevPAR against a defined competitive set, and at your index against that set. A hotel beating its market is demonstrating management quality, and that is worth paying for. A hotel trailing its market is showing the buyer upside they intend to capture themselves — which is precisely the upside they will not pay you for.
Context matters, and it is worth presenting accurately rather than optimistically. Year-to-date 2025 RevPAR across European chain-scale hotels rose around 2.8 per cent year on year, with growth expected to settle in a 2 to 5 per cent range after the 7 per cent recorded in 2024, while luxury and upper-upscale hotels ran far ahead at roughly 10.8 per cent. A seller whose growth came from the market rather than from the hotel should expect the buyer to identify that; a seller who outperformed a slowing market should say so with the benchmark attached.
Present three years of monthly occupancy, ADR and RevPAR segmented by market — corporate, leisure, groups, conference, weddings — with rate by segment. The mix tells the buyer how durable the revenue is, and a hotel filled by one large corporate account or one tour operator carries concentration risk that shows up in the price.
Two hotels with identical RevPAR can have materially different profit, and the difference is often distribution.
Buyers examine the share booked through online travel agents, the commission paid, the share booked direct, the contribution of the brand's reservation system where one exists, and the cost of any loyalty programme. Heavy OTA reliance is not disqualifying — it is a legitimate acquisition channel — but it is a margin fact, and a buyer models it.
What they are testing is whether the hotel owns its demand or rents it. A strong direct share, a real database, recent review scores and repeat corporate accounts suggest demand that survives a change of owner. A hotel whose bookings arrive entirely through third-party platforms is more easily replicated by the competitor next door, and is valued accordingly.
Hospitality carries a licence stack that has to be checked before completion, and any gap in it delays the deal rather than merely repricing it.
Expect scrutiny of the alcohol licence and who holds it personally, food hygiene registration and the latest inspection rating, fire risk assessment and safety certification, the planning use class and its conditions, and where applicable the tourist accommodation registration or star classification. A licence held by a named individual rather than the company transfers under a separate procedure with its own timetable.
Staff transfer under acquired rights rules in most European jurisdictions, so the buyer inherits the team, their terms and their accrued entitlements. That is usually welcome — hospitality teams are hard to rebuild — but it makes the employee schedule a real diligence item: contracts, tenure, notice, accrued holiday, pending claims, and the position on tips and service charge, regulated differently market by market.
Two roles carry disproportionate weight: a general manager who runs the property and holds the corporate relationships, and a head chef where food and beverage is material. If either is the owner personally, the buyer is looking at a business that loses its operating core on completion, and the price reflects it.
Hotels take money before they deliver the service, and every euro of it is a negotiation point.
Advance deposits for rooms, events and weddings sit on the balance sheet as a liability for work not yet performed. Gift vouchers do the same, often with a long tail and poor records. Forward bookings are an asset commercially and a liability financially, and the completion accounts have to treat them explicitly.
Seasonality complicates the target. A hotel that swings from a full summer to an empty February holds a very different cash position depending on the completion date, so the mechanism must be set against a normalised level rather than the balance on an arbitrary day. Getting this wrong is one of the most common ways a headline price shrinks between agreement and completion.
Normalise the accounts honestly, and show departmental profit — rooms, food and beverage, spa, events — rather than one blended figure. Adjustments a buyer can verify survive; adjustments resting on the owner's word push them to discount the whole earnings figure.
Hotel investment funds and institutional real estate buyers want scale, a defensible location and a stable income structure, and often prefer leased or managed arrangements to running the hotel themselves.
Operating groups buy trade and are the most likely to pay for management quality, brand fit and a team that stays. They look hardest at the competitive set data.
Private equity buys platforms and portfolios, and single assets mainly as a base to build on, pricing management continuity heavily.
Owner-operators and family buyers dominate the smaller end, especially for independent and boutique properties, and value character in ways a spreadsheet does not capture — but they are the most financing-constrained group.
Alternative-use buyers appear where the building is worth more as something else — residential conversion, student accommodation, senior living — and in weak trading markets they occasionally set the price. Worth knowing before you market the hotel as a hotel.
Which of these values a specific property highest depends on whether the value sits in the land, the building or the trade, and Conclave Partners tests that before any approach is made, because a process aimed at the wrong audience cannot be re-aimed once it is running.
Expect the brand or management agreement to become a condition, with consent or a negotiated PIP scheduled before completion, and expect licence transfers to sit on the critical path.
Expect a deposit-and-forward-booking mechanism in the completion accounts, and negotiate the normalised working capital level rather than accepting a date-based snapshot.
Expect the property survey and, increasingly, an energy assessment to generate price conversations. Findings get priced or fixed; they are not insurable.
Expect key-person arrangements for the general manager, and a handover from the owner where the owner has been operationally central.
And expect the shares-or-assets question to be driven by licences and contracts as much as by tax. Take advice on both before the process opens, because the answer changes the buyer list.
Decide the structure: going concern, operation under lease, property with tenant, or a split. Model each and pick deliberately rather than by default.
Read the brand or management agreement and get the franchisor's written position on change of control, consent conditions and likely PIP scope.
Build the capex file: what has been replaced and when, what is due, what it costs, and current condition and energy certificates.
Assemble three years of monthly occupancy, ADR and RevPAR with competitive set benchmarking and segment mix.
Document channel mix and the true cost of acquisition per channel, and grow the direct share where you can.
Clean up the licence pack: alcohol, food, fire, planning, registration, and who holds each personally.
Prepare the employee schedule, including tips and service charge treatment, and reduce dependence on any single individual — including yourself.
Separate departmental profitability and strip personal expenses out of the accounts before a buyer finds them.
Deal with deferred maintenance that is visible to guests and cheap to fix, and cost — rather than start — the work that is neither. Sellers who ask Conclave Partners where to begin are usually pointed at the capex file and the brand's change-of-control position, because those two documents decide how much of the headline price actually survives to completion.
A prepared hotel typically takes six to nine months from launch to completion, and longer where a franchisor consent, a licence transfer or a planning question sits in the path. The property diligence alone — survey, environmental, title, and increasingly energy — runs on its own timetable and does not compress under commercial pressure.
Confidentiality is harder here than in most sectors. Staff notice unfamiliar visitors in a building they work in every day, and guests and suppliers talk. Inspections can usually be presented as insurance, valuation or refurbishment surveys, but a plan for what the team is told, and when, should exist before the first visit rather than being improvised after someone asks.
Timing matters commercially. Marketing a seasonal hotel immediately after its strongest quarter, with the year's trading evidenced and the forward book filling, presents a very different picture from marketing it in the trough with everything ahead unproven. In our experience at Conclave Partners the difference between those two launch dates is frequently worth more than any single point argued in the negotiation that follows.
It depends on where the value is. A strong building with ordinary trade often raises more through a sale-and-leaseback, the property going to an investor and the operation to an operator. A hotel whose value is the trade usually sells better as a going concern. The warning is that the rent becomes the operation's permanent fixed cost, so a rent set to flatter the property sale can destroy the business sold alongside it.
Read it early. These agreements typically contain change-of-control provisions giving the brand consent rights, approval over the incoming owner, and sometimes a right of first refusal over the sale. Consent is usually conditional on a property improvement plan, which the buyer deducts from the price. Ask the brand in writing what it would require before you go to market.
Broadly what it would cost to put right, and sometimes more, because an undocumented backlog invites the buyer to assume the worst. A large refurbishment in the final year rarely returns its cost. What does pay is a documented capex history, a costed forward plan and current certificates, which turn an open-ended fear into a number both sides can argue about on evidence.
Against a competitive set, not in isolation. They compare occupancy, average daily rate and RevPAR with comparable local hotels and look at your index against that market. Beating the market is management value you can be paid for; trailing it is upside the buyer intends to capture, and nobody pays you for their own plan.
In most European jurisdictions, yes: employees transfer with existing terms and accrued entitlements under acquired rights rules. That makes the employee schedule a real diligence item — contracts, tenure, notice, holiday accrual, pending claims, and the treatment of tips and service charge. Dependence on a single general manager or head chef is a specific risk buyers price.
For a prepared property, roughly six to nine months from launch to completion, with franchisor consent, licence transfers and property diligence the usual causes of delay. The preparation that determines the price — structure decision, capex file, benchmarked trading data, licence pack — needs about twelve months before that.
Ildar Zakirov — Conclave Partners ildar@conclavepartners.com
Sergi Kosiakof — Conclave Partners sergi@conclavepartners.com