In our economy that screams doom and gloom lays a sleeping window of opportunity. Every day we hear our news media report how stocks are plummeting and large corporations are seeking colossal bailouts from our government.

The reality is that people are still doing business, just differently. In the hotel industry the sleeping window of opportunity in the first time buyers market is to build or locate hotels in rural areas or small towns. These pockets of growth are a gold mine of the future. For example, right now the typical profile of a seller in these select markets is offering an average 20% reduction in their selling price. If you have a solid credit score and the financial backing to put a 20%-30% down payment, you have the buying power to purchase a hotel at a discount. If your intent is to flip the hotel, I recommend you hold onto it for approximately six months to one year. With the economy at rock bottom now there is only one way, but up. Therefore, I believe that within the next year, banks will start lending, the real estate market will improve, and with the promises of our new president, regardless of your political opinion, my projection is buyers will gain a 20% increase above the original discounted purchase.

Surprisingly, in spite of the shaky economical climate, the new construction hotel market has remained relatively untouched. For a first time buyer with financial backing and a strong resume, building a new hotel is an excellent option. Interest rates and commercial land prices are low and as the economy recovers, your ROI is realized in a shorter period of time.

Franchise hotels and motels generally go from X2 ½ – 3 ½ on the room revenue in rural areas and small towns. In large cities the room revenue can be X5 or higher. Purchasing an operational franchise hotel with renovation in mind is an option for a 1st time buyer. However, be sure to ask and review an inspection report during the due diligence stage. The biggest mistake as a buyer is making a purchase without being aware of the hotel PIP. Another point to consider is what flag is on the high-rise sign. The reputation of the franchise flag will dictate your walk-in market.

SBA is still an answer compared to a conventional loan for new construction. Although SBA has tightened their loan approval process, they are more lenient in approving a loan to a qualified buyer with a solid business plan. 1st time buyers must have hotel management experience or hire a management company to oversee operations.

Tags: business acquisition, business start up, Buying a business

This entry was posted on Saturday, May 23rd, 2009 at 10:31 am and is filed under Investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or ask a question.