Acquiring or Selling a Hotel Management Company | Hotel Marketing
By: Bezla Llc
Tags: Beatthecompset, Beatthecompetition, Hotels, Hotelmarketing, Bezla

Acquiring or Selling a Hotel Management Company | Hotel Marketing

#HotelMarketing #BeatTheCompetition #Bezla Bezla.com

No matter where you are on your hotel revenue journey, Bezla can help you go further.

Bezla.com LLC

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Phone: +1–888–999–8086

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Buying or selling a hotel management company should now be placed in utmost consideration. Typically, sales prices would range around four to six times earnings, not including taxes and interest. But we should also be aware that hotel management companies can generate even more with a proven track record.

The hotel industry has distinctive traditions, practices, arrangements, operations, and agreements regarding other fields. Not to mention the franchise agreements, management contracts, ownership design, licenses, and permits to name a few of the practices mustered within the hotel industry, which is only the surface.

Most of the time, we can categorize buyers as either financial or strategic. Financial buyers will cautiously consider cash flow more than strategic buyers will. It would be challenging for financial buyers to reconsider companies lacking synergies but can readily overlook organizational weaknesses. This logic is mostly because financial buyers will not replace existing management. After all, their usual intention is to sell their acquisitions.

On the other hand, strategic buyers will pay a premium for the business if the competition is significant. Strategic buyers will look more into the existing management at the company level than financial buyers and are more likely to get rid of the current staff after securing the deal.

Business sales can involve either assets or stocks with varying liabilities and tax implications. Sellers often prefer selling stocks, increasing tax savings, and enabling them to transfer existing liabilities to the company. Buyers, on the contrary, prefer asset purchases. They will want to rid themselves of responsibilities in the sale from both the hotel owners and employees. It is a must that careful assessment of tax consequences and liabilities should be employed. One can even engage an investment banker to prepare their offering note. At the end of the day, before sales and purchases, there is decision-making.

Some hotel management companies manage hotel assets of an outside-party hotel owner with multiple subordinates, some with approval rights.

· Hotel Owners: Hotel owners may demand financial modifications, safeguards, or guarantees against possible risks or even adjustments of management agreements. They will not appreciate a reduction in the quality or an increase in expenses. Heeding the owner’s consent due to management agreements may result in significant delays. With these requirements, hotel owners and buyers or sellers should make concessions to satisfy the demands of both parties. Expect dilemmas, anticipate, and address their impact on sales and pricing.

· Lenders: Often, lenders will take a substantial interest in managing hotel collateral and usually require approval rights over who controls the hotel. It is essential to determine the rights of both parties and acknowledge the existence of direct subordination and the importance of understanding it. Cash management banks, Commercial Mortgage-Backed Securities requirements, and deposit accounts control agreements’ analysis are necessary.

Dissecting loan documents is most often inevitable, and parties must prepare to do so because, sometimes, simply obtaining those documents can be proven challenging. This diligence pays off because getting lender consent will mean a smooth-sailing transaction will take place.

· Franchisors: Most of the time, hotels are under a franchise agreement. This agreement means that the franchisors can first approve the new buyer. Often, the buyer must sign up on the list of the preapproved hotel manager. Otherwise, the transaction will take significant delays.

· Employees: Employees can have a massive impact on sales and the company in general. That is why confidentiality is necessary. In the early stages of these transitions, one can expect to maintain this confidential information, but hoping this knowledge never to see the light of day is unrealistic. With this understanding, device contingency plans to address this leak in data. Employees will need reassurance, and the seller must prepare to address employees’ concerns.

Prevailing laws and contractual agreements will determine the necessity of transferring licenses and permits. Among other documents, one must consider liquor licenses earlier. It will require state approval and frequent a separate agreement. These papers will require negotiations between buyers and sellers and the cooperation of both the hotel owners and lenders.

If management companies intend to sell their agency, they must operate as though the sale is fast approaching to increase their value and the possibility of the sale. And even without the intention of selling the company, one must still do so to prepare for an eventual sale. This preparation means performing at the highest professional standard. Selling owners must also supply evidence of the revenue stream. With all of this considered, closing the deal is faster, and the company value is higher.

Emphasizing the importance of engaging tax and hotel advisors with experience in solving key concerns and challenges in acquiring or selling hotel management companies cannot be overstated. With the right expertise, company value increases, transactions flow smoother, and a decreased consequences for all parties.

If Bezla could be of any service to your hotel marketing, visit us at Bezla.com or give us a call at 888–999–8086.