Five Ways Brokers Work With Hoteliers to Close a Deal

The process of selling or purchasing a hotel can be daunting. Ed James, managing principal at Mumford Company, a full-service hospitality brokerage advisory firm, says that one of the biggest benefits of working with a broker is having an advisor from the start, when a hotelier is considering a property sale, through the end, when transitioning ownership. “The very first thing that we typically do is an overall evaluation of the asset—who owns it, how it’s financed, what its franchise situation is, and all those kinds of things,” James explains. “It might be that the best approach is to keep it, fix it, change it, or do something to it before going to market.” James shares five ways that brokers work with hoteliers to close successful hotel deals.

1Gather and present information on the property.

Brokers are experts in gathering and presenting information on an asset to buyers, lenders, and others—whether through reports, marketing materials, or a website. “Brokers know what information is needed and how best to display it,” James says. “Technology allows anyone with a laptop to have a tremendous amount of information, but the hotel brokerage function is having the expertise to use that information correctly.”

2Strategically market an asset.

Brokers also identify and target potential buyers, creating a bidding environment that guarantees the seller is getting the best price. This requires both connections and some degree of sensitivity, James says. “Having a business for sale sometimes can be tricky—it can be tough on staff and cause negative local feelings about the property if somebody wants to sell it,” James explains.

3Pre-qualify potential buyers.

Unqualified buyers can result in taking a property off the market for months only for the deal to fall through. “If you haven’t ever done it before, somebody might offer you an acceptable price, but you don’t know exactly what questions to ask about whether or not they can actually go through with the deal,” James says. “The broker does know those things and will pre-qualify these people for you.”

4Franchise and financing negotiations.

Brokers guide hoteliers through the due diligence process, helping them navigate the property’s physical inspection as well as franchise, financing, and management negotiations. “Negotiating a new franchise agreement is almost a job unto itself, as is securing a loan for the property,” James says. “The number of things that can go wrong in those two areas is just incredibly high. But having someone that knows the process can avoid common pitfalls.”

5Assist with closing and transitioning ownership.

Lastly, brokers assist with closing a deal and the subsequent changeover of ownership. “Preparing for a real estate closing, preparing for a loan closing, and then having one group walk out and another group walk in is not a simple process,” James says. “You want to keep your employees, you want to keep everybody happy, and a lot of times that can be a very trying time, especially if you don’t know what you’re doing.”

 


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