A hotel sells for what the buyer can take over

Are you expecting the buyer of your hotel to pay for the hotel you know, rather than the one they can actually take over?

You know the rooms, the regulars, the good months and the reasons behind the bad ones. You have spent years building something that works.

A buyer cannot buy any of that directly. They can only buy what transfers on settlement day: a lease or a title, a set of agreements, the licences, a trading record, a building in a certain condition and a team. Anything that does not transfer cleanly gets discounted, or it gets left out of the price.

Most hotel owners find this out from the first serious buyer. It is better found out three years earlier.

How to sell a hotel business: prepare what transfers

Prepare the hotel for the buyer's checklist rather than your own. Start two to three years out, because the most valuable items take that long to fix, and a buyer reads a trend, not a good month.

Hotel buyers pay for six things, roughly in this order.

• Trading history. At least three years of clean monthly accounts, with occupancy, average room rate and departmental results that match what was lodged with the tax office.
• Tenure. If you lease, the years left, the options and the rent review terms. If you own the freehold, whether you are selling the property, the business or both.
• Agreements. Any management or franchise agreement, how long it runs, and whether it survives a sale or lets the other party approve or refuse the buyer.
• Licences. Liquor, gaming and food licences, and the time it takes for them to move to a new owner.
• Condition and capex. The state of rooms, plant and systems, and the spending a buyer can see coming in the next five years.
• Staff. Who runs the hotel without you, their entitlements, and whether they will stay through a change of owner. An owner who is the hotel's daily answer to everything is a founder-dependency discount waiting to happen.

Licences are the item owners leave latest. In Victoria, for example, the government's guidance says to apply at least eight weeks before a liquor licence transfer is due to take effect. Police have a month to object, decisions take about five to seven weeks, and the new owner must not supply alcohol until the transfer is granted. Rules differ in each state, so check yours with your lawyer before you set a settlement date.

Some of this costs money you may not get back, and that cost is real. A refurbishment a buyer would have done their own way. A lease extension the landlord charges for. So spend where the buyer would otherwise take a discount, and leave the rest.

Polished, a hotel looks good on inspection day. Prepared, it survives due diligence.

Crown Resorts and Blackstone: the price rested on the licences

In May 2019, Melco bought nearly a fifth of Crown Resorts from James Packer's company at A$13.00 a share. Over the next two and a half years, Crown was found unsuitable to hold its casino licences, first by the Bergin inquiry in New South Wales in February 2021, then by Victoria's royal commission in October 2021.

Blackstone made its first proposal in March 2021, in the middle of that. It came back with higher bids through the year, and in February 2022 Crown signed a deal at A$13.10 a share, about A$8.9 billion, roughly A$845 million more than Blackstone's first offer.

The price was only half the deal. The rest was conditional on gaming regulators in three states, and on 9 June 2022 the New South Wales and Victorian regulators approved Blackstone as an owner after months of probity checks, with strict conditions attached. Western Australia and the Federal Court followed, and the deal completed that month.

Most people remember this as private equity buying a damaged asset cheaply. The figures say otherwise. After the inquiries, the agreed price per share sat just above the one Melco had paid before them.

What Blackstone paid for, in the end, was a set of licences that could pass to a new owner. A hotel is the same at a smaller scale. The rooms are what the guest sees. The lease, the agreements and the licences are what the buyer is actually buying.

Why I do it this way

I have stood on both sides of this, and I prepare a hotel this way now.

I was a hotel general manager at twenty-five, and at twenty-eight I bought my first hotel business with money borrowed from family and friends, repaid within twelve months. Buying it taught me what an owner never sees from behind the front desk: the lease clause, the licence timetable, the agreement that can outlast you.

So when I look at a hotel now, I look at it as the next buyer would. What transfers cleanly, what needs someone's approval, and what walks out the door on settlement day.

None of this promises a better price. It keeps the price from being lost on paperwork.

Do this before Wednesday

Pull out your lease, your licences and any management or franchise agreement. List the expiry date of each and who has to approve a new owner.

By Wednesday, send that list to your lawyer and ask one question: what would stop this transferring on a settlement date six months from now?