When purchasing any business, carrying out robust research is crucial, following a few basic guidelines to ensure that it is approached in a sensible manner. It is important never to let the heart rule the head in these matters, as buying a business is as important as buying a home, and your future financial status depends on its success.
Gather as much information as possible about the area you wish to work in. If this is the accommodation sector, then talk to hoteliers, guesthouse owners and self catering business people. To do this, you may have to stay in a number of different properties, watch how they operate, talk to the owners, and be able to view your stay from a different perspective. Stay in towns other than the one where you intend to purchase. It is crucial to see the competition that other locations have to offer. Compare the ‘break’ to one taken in the type of property you are thinking of purchasing, in the area you wish to settle. In other words, act as a visitor as if in your own business, and be critical. Then put yourself in the operators’ shoes and notice how much additional work goes on behind the scenes.
Make copious notes and continuously review these notes to see if there are any common threads running through. Research can identify potential problems and pitfalls that you may wish to avoid e.g. long working hours, being available at all times, seven days a week etc.
Once you have decided on a location and the type of business you wish to operate, take the next step to decide on a specific area within that location. Many tourism destinations form natural ‘zones’ and care must be taken to ensure you are buying a business for the market you wish to attract in a suitable area. For example, town centre businesses usually complement the nightlife scene and therefore are usually less attractive to family and the elderly visitors. These vary from town to town, but research must be carried out to ensure you are purchasing in the right spot. Seek help and advice every step of the way.
Check that the price you are able to afford matches the price the chosen property is being sold at. There is no point over-reaching your budget from the outset. Be realistic in what you can afford, as you will probably be running at a loss in the first few months, or at best ‘breakeven’ in the first year, so over spending will put you in a dangerous ‘cashflow’ position. This is crucial if you are purchasing a business ‘out of season’, as it will take longer to recoup any outgoings already made, as income from guests may not be forthcoming.
Research everything you need to know about running an accommodation business. Books are available, courses are provided, and in some instances potential vendors will let you work in the hotel prior to purchase. It is even a good idea to consider getting a weekend job in an accommodation environment and actually find out what is involved, and to see if you like it, before making any commitment.
Check all relevant Legal Requirements necessary and put in place prior to opening.
Remember it is not like having family guests to stay - this is a business venture and must be treated as such.
The benefits are self evident:
- There are no hidden surprises, robust research identifies all issues to be covered
- Ensures that the right property at the right price in the right area is purchased
- Ensures that the accommodation industry is the one you wish to work in
- Provides an opportunity to ‘change your mind’ if necessary
- Identifies the market and competition, which assists with Business Plan formation
Research provides valuable information to assist in a speedy business strategy
It is difficult to say when enough research is completed, as you do not know what you do not know, so how do you know when to stop? There are some guidelines that you should follow when considering buying an accommodation property.
- Price, number of bedrooms/apartments, location and car parking facilities are usually the key priorities
- Develop a checklist of advantages and disadvantages and use it for each property you view. Do not rely on memory, as one property will very quickly blur into another from memory
- Identify any potential risks that may prevent your business from attracting the visitors you wish to target e.g. location, noise, lack of required facilities, no parking close by
- Does the property have the facilities you wish to offer, and if not, can they be added and at what cost e.g. en suites bedrooms, double glazing, central heating, bar, lift?
- If all ‘standard’ bedrooms, then the public bathroom ratio must be adhered to for accreditation purposes in future. Are self-catering apartments all self contained?
- Where will you sleep? Think about the ‘private quarters’ available, to see if sufficient for your family needs. Some operators sleep in the basement with no natural light
- Do you think that the number of bedrooms, and the occupancy figures, will provide you with enough income to cover overheads. Remember you will not be full every night all year round
- Be pessimistic and realistic, and not optimistic about what income to expect
- Will the property need a bank loan, a mortgage, be freehold or leasehold?
- How many bedrooms can be managed without employing staff? – do not guess, obtain expert advice
- Does the property have a bar and the necessary licences? These will need to be applied for and certification be obtained
- Does the property and its location match the market segment required? eg. Conference delegates will wish to be close to conference facilities
- Do not try to be everything for everyone, as this will result in failure