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The Investment Memorandum or Information Memorandum is a document which has been prepared by professionals, specialized in economic and financial communication, and is addressed to a public of final investors. The Investment Memorandum is the first formal document that allows presenting the opportunity of hotel investment sale or hotel lease deals, producing a range of useful information to preliminarily evaluate the interest in the opportunity presented.

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The Investment Memorandum is comprised of some standard parts that sum up in detail the features of the sale or investment opportunity, the offer modalities adopted to promote investments, the circumstances through which the real estate object is offered to the market, the formulas that can be adopted to evaluate the opportunity and the conditions to make purchase or investment offers.

The standard parts comprising the Memorandum are different, according to the investment produced and the destination market. However, we can identify some distinctive parts that are suitable for hotel, accommodation and tourist investments:

   1. Executive Summary

   2. Main Features of the Investment

   3. Location

   4. Building/Hotel Description

   5. Hotel Market

  6. Economic and Management Performances

  7. Offer Conditions.

The Executive Summary is a very short text, that can be typically summed up in one page. It condenses the most important pieces of information of the whole Memorandum. Through this “summary”, investors or potential buyers have to be able to receive all those crucial information to correctly evaluate the opportunity offered.

The Main Investment Features synthetically identify and qualify the fundamental elements of the opportunity, communicating to the potential receiver all those strengths that investments offer. They heighten the unique qualities of the hotel property, the location and market features in which the hotel operates, the improvement potential of the management or real estate, the favorable conditions offered for the acquisition.

The Location describes in detail the features and conditions of the place in which the hotel property is located. The reported information regards both the so-called macro-location, that is the most extended geographical area in which the hotel is located, and the micro-location, that identifies a much more restricted geographical and environmental scale. In fact, it describes all the proximity elements that can influence –positively and negatively – the hotel business of the property object of the offer. 

The Building or Hotel Description gathers and exposes hotel technical and real estate information, showing clearly all the qualifying distinctive elements to the eye of a potential buyer or investor. Such part exposes all the typical functions of the hotel according to management uses. Furthermore, it underlines the possible potentials of the real estate, for example the further building capacity or the possibility of transformation and conversion. It also highlights in detail the characteristics of the rooms, catering spaces, services for conferences and meetings, technical installations and cadastral and city planning information of the property.

The Hotel Market section regards information and features of the competitive environment in which the hotel operates. A qualified analysis of the hotel market should also comprise the identification of the reference competitive set, selecting the main market performance indicators, such as the occupation level and the market average revenue.

The Management and Economic Performances report numerically all the most relevant pieces of information that are qualified on the basis of investment. Therefore, they report the statements of the profit and loss account, which are reclassified according to the standards of hotel accounting data.

The Offer Conditions report all the elements aimed at informing potential buyers about the modalities of the opportunity analysis and, if interested, the formulas to show their interest to invest. Typically, this paragraph also describes how to sign possible non-disclosure agreements and the conditions through which investors can access the investment due diligence. In some cases, even possible temporal terms and deadlines for the presentation of offers are reported.

Generally, presenting an Investment Memorandum is an advantage for both parties committed in a commercialization process of properties or hotel, hospitality and tourist companies. In fact, on the one hand, proposers qualify all the pieces of information that are fundamental to promote their own sale, emphasizing the most important qualities of their hotels and underlining the potentials of the object of the sale. On the other hand, potential buyers or investors receive in a transparent and structured way a set of information that is necessary to express a first opinion of interest and rapidly decide if the investment or purchase opportunity corresponds to their criteria. 

Furthermore, a quality Memorandum should be enriched with high-quality photographs of the external and internal spaces of the hospitality property. It should also comprise detailed property plans, possibly of all the floors, basements included. The document should also be available in both paper and digital format, to be easily and rapidly shared with the receivers, be they potential buyers, investors or professional third parties.

Finally, a Memorandum should be published in different languages to be addressed to different groups of investors. Typically, Investment Memorandums are written in Italian and English. This way, they allow communication through the most widespread language in the international financial community.

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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