What moves the price when a hotel changes hands

Oct 15

8 min read

Two hotels can finish the financial year with almost the same revenue and sell at very different prices. Buyers set the price on what they find once the data room opens. They want to know how dependable the profit is, what the building will need in its first years under new ownership, and which contracts will stay with the hotel after the sale.

This article follows a hotel sale from the buyer's position. We wrote it for owners in Europe and Southeast Asia who expect to sell in the next few years. It is also for the general managers and commercial directors who will put the operating file together.

What are hotel buyers paying for in 2026?

Fewer hotels changed hands in Europe in the first half of 2026, and the ones that did were of higher quality. HVS counted 183 hotel transactions over the six months, worth €9.4 billion. That volume was 10% below the first half of 2025 and 11% above the ten-year average for a first half. The average price per room rose 18% to €268,000, a ten-year high. HVS attributes the rise mainly to the quality of the hotels sold, more than to a general increase in market values (Horch et al., 2026).

The same report shows private equity firms ending the half as net sellers of €1.3 billion, while real estate investment companies were the largest net buyers. A real estate investment company usually holds a hotel for longer than a private equity fund does. It prices the hotel on the earnings it expects to sustain across that hold.

Owners in Vietnam and the wider region should expect the same scrutiny, with closer attention to seasonality and to the operator behind the numbers. When a buyer pays more per room, a wrong assumption costs more, and due diligence takes longer.

Buyers test the quality of the reported profit before anything else. They want to know how much of it repeats every year, and how much came from one strong season, one large contract or a postponed cost.

The starting point is the profit and loss accounts for the last three years, with the trailing twelve months set against the budget. The buyer then adjusts the profit for items that will not repeat. A large conference booking that filled the hotel for a month comes out. If the hotel spent almost nothing on maintenance for a year, the buyer deducts a normal year's spend, because the repairs are still waiting. If a general manager's position stayed vacant for six months, payroll was lower and profit higher. The buyer deducts the six months of salary the hotel did not pay.

Departmental margins come next. The buyer compares the margins in rooms, food and beverage, and spa with the hotel's own history and with comparable hotels. Any outlier needs a reason. A restaurant that loses money every year is a cost the new owner will either carry or fix, and the buyer prices one of the two.

Buyers also look at where the revenue comes from. A resort that fills half its rooms through one or two tour operators, or a city hotel that depends on one corporate account, carries a risk the buyer will price into the offer.

Guest complaints and online reviews get the same attention. When complaints rise in one department, a buyer expects to spend on staff, training or repairs there after the sale. Our September article describes how we assess a property from the guest's side.

How does a brand's property improvement plan affect the price?

A buyer deducts the cost of the brand's property improvement plan from the price. The buyer also deducts the income the hotel will lose while the works are under way.

When a branded hotel changes owner, the brand inspects the property and lists the works the new owner must complete to keep the flag. The list is called a property improvement plan, or PIP. Brands commonly make their consent to a transfer conditional on one. A plan can range from new soft furnishings and technology to bathroom renovations and work on public areas, each with a deadline.

The buyer prices two costs. One is the capital spent on the works. The other is the income lost while rooms and outlets are closed. If earlier renovation cycles slipped, the plan grows, and the seller pays for the delay through the price. Our August article covers how the management agreement sets the reserve for furniture, fixtures and equipment.

An owner can ask the brand for an estimate of the plan before marketing the hotel. If the seller shares it early, every buyer models the same list of works, and the negotiation starts from known numbers. An independent hotel has no brand plan. A buyer who intends to bring in a brand will still estimate one and price it the same way.

Does the management agreement travel with the hotel?

In many cases it does. Hotel management agreements are commonly drafted to bind a new owner to the existing operator. Some allow the agreement to end on a sale, but only against a termination fee.

Before making an offer, a buyer checks three provisions to see what comes with the hotel:

Assignment clause: can require the buyer to take over the agreement on the same terms.
Consent right: can let the operator approve or refuse the buyer, for example where the buyer owns a competing brand.
Termination-on-sale clause: can allow the agreement to end when the hotel is sold, against a fee set in the contract.

Where the operator contributed key money, the unamortised balance usually becomes repayable if the agreement ends early.

A buyer who wants a different operator, or plans to run the hotel itself, prices the cost of ending the agreement. A buyer who is content with the operator treats the remaining term, the fee structure and the performance test as part of the asset. A hotel offered with no long agreement attached interests a wider group of buyers, including owner-operators and groups with their own brand.

In Vietnam, a resort developed with an international operator carries the agreement signed before it opened, and a buyer reads its remaining term closely. Our August article sets out how these agreements are structured clause by clause.

What can an owner fix or explain before marketing begins?

An owner who reviews the hotel as a buyer would, six to twelve months before marketing, can fix the inexpensive items and prepare an explanation for the rest.

Fixes within reach:

filling vacant management positions
resolving the complaints that recur in reviews
renewing or ending supplier contracts that have lapsed
reconciling management accounts with audited accounts
documenting capital spending for the past five years
preparing evidence for each adjustment to profit
confirming that licences, permits and title documents are complete

In Vietnam, the documents buyers' lawyers will request include the land use rights documents, operating licences and fire safety approvals.

General managers carry much of this work. A GM who keeps a clean record of maintenance, complaints and staff turnover gives the owner a file that holds up in due diligence.

Buyers pay most for operating improvements that already show in the numbers, and those take the longest to achieve. In a Luxembourg F&B turnaround we led, guest complaints fell sharply and restaurant revenue rose in the same period. At L'Hôtel du Golf in Deauville, our quality audit led to a training programme and an action plan, and quality and revenues rose 23% within a year. A buyer reading records like these can see the operation improving before the sale.

Some items cannot be fixed in a year, such as a building due for full renovation, a lease with years left to run, or a market that has softened. A seller who presents these with figures, before the buyer finds them, faces fewer price reductions late in the process. Owners who want an independent view of the operation before a sale can start with the assessment described in our September article.

When does an off-market sale make sense?

An off-market sale makes sense when the owner values discretion and stability above the widest possible price discovery. It also suits cases where the likely buyers are few and can be identified.

Owners choose a confidential sale to protect the business while it is for sale. Word of a public listing reaches staff and regular guests quickly. Good employees start looking elsewhere and corporate clients ask questions, and a sale that stalls in public leaves the hotel weaker than before. A confidential process also suits hotels with a natural pool of buyers, such as family offices or groups expanding in one region.

The trade-off is a narrower field. A public process can find a buyer the owner never considered, and competition between bidders can lift the price. An owner who chooses discretion accepts that risk in exchange for control over who knows, and when.

We handled the off-market sale of a boutique resort in Southeast Asia, from the valuation to the choice of buyer and the negotiation. A confidential mandate follows a fixed order:

An anonymised teaser gives the region, key count and segment, with nothing that identifies the property.
Each buyer signs a non-disclosure agreement before learning the name.
We approach buyers one at a time, from a short list chosen for their fit with the asset.
The operating file is ready before the first call: the last three years of results, the contracts and the capital expenditure plans.
Terms are agreed in private, and the owner decides when staff and guests hear the news.

An owner planning a sale in 2027 can start the buyer's review of the file this quarter, while there is still time to act on what it finds.

Considering a sale you would rather keep confidential? We can discuss a confidential mandate with you.

Frequently asked questions

What do buyers look at first when buying a hotel? They look at the quality of the reported profit over the last three years: how much repeats each year and how much came from one-off items. Buyers then test departmental margins, revenue concentration, guest complaint trends and the capital the building will need. Each finding feeds into the price they offer.

What is a property improvement plan in a hotel sale? A property improvement plan, or PIP, is the list of works a brand requires before it lets a new owner keep the flag. Buyers estimate the cost of the works and the income lost while they are carried out, and deduct both from their offer.

Does a hotel management agreement end when the hotel is sold? Only if the agreement provides for it. Some agreements bind the new owner to the existing operator, and others allow termination on a sale against a fee. Buyers review the remaining term, the termination provisions and any key money before setting a price.

How early should an owner prepare a hotel for sale? Six to twelve months before marketing gives an owner time to fill vacancies, resolve recurring complaints, tidy up contracts and document capital spending. Items that cannot be fixed in that time can be explained with figures before buyers find them.

What is an off-market hotel sale? It is a confidential process in which the hotel is never publicly listed. Buyers receive an anonymised teaser, sign a non-disclosure agreement before learning the property's name, and are approached one at a time. Owners choose it to protect staff, guests and trading during the sale.

References

Horch, L., Champlong, G., & Martin, C. (2026, August 20). H1 2026 European hotel transactions. HVS. https://hvs.com/article/10537-h1-2026-european-hotel-transactions

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