Due Diligence bei Hotels - Hospitalityseeker.com™

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 postion
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 ceritifcation

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.

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Hotel Due Diligence (DE)