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Hotel due diligence investigations are undertaken in different contexts and to achieve different ends.  Typically, these investigations are conducted by buyers and investors in the process of evaluating a hotel investment, and thus are tailored to the acquisition of a hospitality asset. 
 
The whole process involves some routine and some highly-specialized tasks, which can take the investor between one and three months in the most widely-accepted versions of the process. With the advent of the internet, auditing documents has become much easier, thanks to the digitization of paper documents and to the ease with which one can access servers from all over the world, thus simplifying the first phase of due diligence in a hotel real estate investment.
 
 
  • Analysis of the hotel asset’s reference market
  • Analysis of competitors and the market
  • Analysis of current performance and projected future performance
Market
due diligence
  • Verification of ownership of the asset’s title
  • Sale and lease contract analysis
  • Checking the status of any litigation
  • Composition of a legal document checklist
Legal
due diligence
  • Tax conditions
  • Tax risk evaluation
  • External audit of tax position
  • VAT and tax reconciliation
  • Property tax projections and valuation
Tax
due diligence
  • Technical verification of the real estate
  • Monitoring land registry data and correspondence with the state of places
  • Checking for the presence of asbestos
  • Fire code certification
Technical &
Environmental
due diligence
  • Pre-acquisition hotel evaluation, to determine the market value of the asset
  • Corporate and accounting audits, and outlining potential acquisition strategies (transfer of property vs. transfer of shares)
  • Preparation of set documents to share between the parties, including the sale and purchase agreement
Financial due diligence
Investment Decision

 

Pre-acquisition due diligence investigations are often performed by specialized professionals hired by the buyer or investor in order to reduce the risks associated with the acquisition of the asset. The due diligence process – facilitated by the seller – almost always begins with the signing of a preliminary confidentiality agreement known as an NDA, or Non-Disclosure Agreement, the purpose of which is to ensure the confidentiality of all of the information made available to the purchaser.

During the analysis, the main objective of the hired professionals is to render as faithfully as possible the buyer’s vision – legally and physically, technically and fiscally – passing on any discrepancies to the buyer in the evaluation phase of the investment. Following due diligence, acquisition proceedings can also be halted in cases in which the due diligence proceedings make it clear that completion of the transaction would be impossible, risky, or simply more complicated than expected.

In other cases, due diligence can bring to light minor deviations that do not impede the completion of the transaction, but instead, cause adjustments in the price agreed upon by the parties. Due diligence therefore fulfills its role of verifying, checking, and ascertaining the status of all elements that have the potential to be critical to the acquisition of hotel and hospitality real estate. 

 

Feasibility studies support the whole process of real estate development, identifying realistic objectives in terms of performance of the new accommodation structure in the market.

Hotel feasibility studies are the result of a professional activity aimed at establishing if a hotel project has enough probability to be economically sustainable, according to current and perspective market conditions.

The process of hotel valuation is linked to the unique features of hotel, hospitality and tourist assets, identifying a monetary value to be attributed to a property in given market conditions.

The hotel valuation is generally carried out by qualified professionals and consists of drafting and issuing a written and signed Report, which also contains the definitions of value determined.

The Investment Memorandums or Information Memorandums represent a key tool to communicate the investment opportunity to the public.

This tool, deriving from the English world, allows a professional, transparent and punctual promotion of the sale and purchase opportunity, qualifying in a unique way the hospitality property offered to the market.

The professional search and selection service of a hotel operator aims at identifying, evaluating and choosing the hotel operator that best suits the hotel owner’s needs, considering his objectives and the hotel features.

The commonly adopted professional approach involves the presence of a professional appointed by the Client that can identify hotel operators interested in signing mainly long-term hotel contracts.

The process of negotiating a hotel contract is a complex professional activity requiring relevant legal and commercial experience, which has to be acquired within the hotel and accommodation industry.

The lease contract and the management agreement are the most common forms in hotel contracts.

It is useful to rely on qualified professionals who know how to draft and negotiate these contracts.

Through franchising, independent hotels can receive commercial and marketing services, associating their own name with a recognizable brand in order to increase customer retention and loyalty.

The franchise agreement negotiation is based on the identification of all elements that are offered by the hotel franchisor, evaluating the perspective benefits that independent hotel entrepreneurs can enjoy through the contract.

Recently, hotel architecture and design have experienced important changes aimed at improving the guests’ experience, in order to best respond to a need of identity and recognition towards the places and the surrounding environment.

Furthermore, for all kinds of accommodation structures there has been a functional innovation path, due to technology advancements and building automation.

Such elements reflect on the distribution of the different areas included in the architectural project.

Hotel due diligence investigations are undertaken by buyers and investors in the process of evaluating a hotel investment, tailored to the acquisition of the asset.

The whole process is often assigned to specialized professionals, whereof principle objective is to render as faithfully as possible the buyer’s vision on asset to current status, legally and physically, technically and fiscally.

Hotel, hospitality and tourist investment sales are experiencing remarkable development thanks to the presence of many international operators and investors who see Italy as a key tourist destination.

The sales process can be directly adopted by the owner or supported by companies and real estate advisors that manage the whole investment sale process towards the market.

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