Build the cash bridge and the capital bridge before deciding what the hotel is worth to you. Market value, a lender’s appraisal and a buyer’s maximum supportable price answer different questions.
What documents should you request first?
- [ ] Monthly operating statements and detailed room statistics for the available historical period, with a clear statement of missing months.
- [ ] General ledger, bank reconciliation and tax records sufficient for the agreed financial-diligence scope.
- [ ] Room inventory, out-of-order history, seasonality and closures; separate rooms available from rooms sold.
- [ ] Booking/channel reports, commissions, group commitments, guest deposits and cancellation obligations.
- [ ] Payroll roster, benefits, agency labour, shared staffing and employment-related commitments.
- [ ] Management, brand, lease, service and technology agreements, including amendments and termination provisions.
- [ ] Capital history, condition reports, improvement requirements and open technical questions.
- [ ] Property tax information, insurance history, licences, title and lawful-use documents, subject to the transaction’s legal scope.
Request aggregated operating information first; guest-level personal data is generally unnecessary for the initial financial screen. Agree authorised users and the permitted purpose of confidential materials.
How should the first model lead to a decision?
Reconcile room revenue and other departments to operating profit, then identify management and brand charges, owner costs, financing, capital and working capital. If a fee is already included in the operating statement, do not subtract it again. Show restricted reserve movements separately so that the same reserve-funded expenditure is not counted twice against distributable cash.
Run a base case and a plausible joint downside: weaker demand can coincide with higher operating costs, slower renovation and reduced loan proceeds. Distinguish a sensitivity that changes one input from a scenario that changes several connected assumptions. The buyer should record the price and additional equity each case supports under its own requirements, rather than copying a national price-per-key range.
Bring in specialists when the gap could materially change the offer or becomes expensive to investigate late. Examples include unreconciled earnings, uncertain tax treatment, a possible major building defect, ambiguous operating rights or reliance on a particular financing structure. Agree who commissions each lender-required report before ordering it twice.
Environmental diligence also has timing and scope requirements. EPA’s All Appropriate Inquiries guidance distinguishes the assessment period and components that require more recent completion; have the environmental professional and counsel confirm the applicable report, updates and reliance before closing. EPA — All Appropriate Inquiries.
Stage output: a conditional bid recommendation stating the price logic, funding requirement, unresolved assumptions, diligence expenditure sought and reasons to renegotiate or walk away.