A hotel and motel buyer checklist covers the franchise flag’s property improvement plan and remaining term, verified occupancy and average daily rate data, group and online-travel-agency booking agreements, and the condition of the major building systems that make the property as much real estate as an operating business.
Reviewed
This checklist covers what to verify before buying a Canadian hotel or motel. A branded property carries obligations a franchise resale in food service does not — a property improvement plan the brand can require after closing, occupancy and rate data that determine what the property is actually earning, and a real-estate asset with its own major building systems — which is where this checklist focuses.
Understand the franchise flag and its capital obligations
If the property carries a brand flag, request the current franchise or licence agreement and confirm what property improvement plan the brand requires as a condition of approving the transferA property improvement plan can require a significant, brand-mandated renovation on a fixed timeline after closing, and a buyer who has not seen it before finalizing price can end up financing a bigger capital project than expected.
Confirm the remaining term of the franchise agreement, any renewal conditions, and what happens to the flag if the buyer does not intend to keep operating under the same brandA property’s value can depend heavily on keeping its existing brand affiliation, and losing the flag — voluntarily or otherwise — can change both the guest base and the achievable room rate.
If a third-party management company operates the property under a separate management agreement, review its term, termination rights and fee structure independently from the franchise agreementThe brand agreement and the management agreement are often two separate contracts with two separate counterparties, and a buyer needs to understand both before assuming either one simply continues after closing.
Verify occupancy, rate and revenue data
Request verified occupancy and average daily rate data for at least the past two to three years, broken out by season, and reconcile it against the property management system’s own reportsA property’s income depends on the combination of how full it is and what it charges, and either number alone can make a struggling property look healthier than it is.
Review group, corporate and event contracts on the books and confirm which are firm bookings versus tentative holdsA strong-looking group booking calendar built mostly on tentative, unconfirmed holds gives a buyer far less certainty about near-term revenue than a file of signed, deposited contracts.
Review agreements with online travel agencies and other booking channels for commission terms and confirm who controls the property’s listings and account accessA significant share of bookings can run through a small number of online travel agencies, and losing control of those listings, or facing a commission structure the buyer did not expect, can materially affect margin.
Assess the real-property component and required systems
Have major building systems — roof, elevators, HVAC, and life-safety and fire-suppression systems — professionally inspected, and request maintenance and inspection records for eachA hotel or motel is as much a real-estate asset as an operating business, and a building system nearing the end of its life is a capital cost that does not show up on an income statement.
If the property includes an on-site bar, lounge or restaurant, confirm the status of its liquor licence and whether it transfers with the sale of the propertyA liquor licence tied to on-site food and beverage service is a separate approval from the property sale itself, and a gap here can affect a meaningful part of the property’s ancillary revenue.
Confirm current staffing levels for housekeeping and front-desk coverage against occupancy, and request a WSIB clearance certificate, or the equivalent workplace-safety-insurance confirmation for the provinceHospitality staffing is highly variable with occupancy, and a property running lean on housekeeping and front-desk coverage may be showing a stronger margin than it can actually sustain at full occupancy.
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.