How To Buy A Hotel: Step-By-Step Guide

The hotel industry is lucrative, and there’s never been a better time to consider investing. 

However, when you want to buy a hotel, you must know about costs, financing, business models, and management approaches. The most successful hotels offer memorable experiences for their guests, distinguishing them from the competition.

For first-time investors, the journey can feel overwhelming. Knowing the whole process, from evaluating the property’s value to selecting the appropriate business model, is essential. If you have no idea what you’re doing, it’s simple to make expensive errors that can affect your long-term success.

In this guide, you will discover how to buy a hotel, project expenses, evaluate financing, and decide on independent or franchise ownership. Let’s begin!

Understanding the hotel industry before buying

Before buying a hotel, it’s important to understand the broader landscape of the global hospitality industry. This sector is a significant part of the service industry and has four key components: food and beverage, travel and tourism, lodging, and recreation. 

By 2029, the hospitality market is expected to grow substantially, reaching $7.24 trillion at a CAGR of 6.1%. A large portion of this growth is driven by the shift to online platforms. Moreover, around 80% of hotel revenue will be generated through online bookings. In 2025, the United States is projected to generate $115 billion in hotel revenue alone, making it the largest market.

So, why is the hotel industry such a good investment? If approached with thorough research, market information, and proper management, here are some reasons why a hotel can be a worthwhile investment:

• Consistent revenue: Hotels in prime locations or tourist areas can provide a steady income. This includes income from room reservations, as well as other services such as food and drinks, event facilities, and other amenities
• Property value appreciation: Apart from the operational revenues, the real estate itself increases in value with time. With the development of cities and neighborhoods, land and building values can rise, providing long-term capital appreciation
• Portfolio diversification: For investors looking to balance risk, adding a hotel to a diversified portfolio can help spread exposure across different industries and asset types
• Tax advantages: Hotel owners can enjoy different tax incentives, such as depreciation, interest, and other operating deductions, based on local laws
• Leverage opportunities: Similar to other types of real estate investing, hotels can be financed with debt, allowing you to use borrowed capital to cover part of the purchase price. If managed effectively, this can boost potential returns

As you start to think about buying a hotel, it’s crucial to assess the various models of hotels. Every model has unique pros and cons, and the right one for your investment will depend on your goals and resources.

Hotels typically fall into one of several categories:

Hotel Type	Description	Advantages	Challenges
Boutique Hotels	Smaller, offering a personalized experience with a unique design and a distinctive atmosphere. Attracts travelers seeking something different.	Intimate, distinctive atmosphere, appeals to niche markets	Limited scale, may require high investment in design and branding
Franchise Hotels	Operates under a well-known brand, benefiting from brand recognition and marketing power.	Predictable revenue stream, brand recognition	Strict guidelines, franchise fees, less autonomy
Independent Hotels	Offers full autonomy, allowing owners to control the brand and guest experience.	Complete control over branding and operations	Requires effort to build brand recognition and marketing
Luxury Hotels	Targets high-end customers seeking top-tier services and facilities. Typically, it involves significant upfront investment.	High potential returns if managed well	High upfront costs, requires premium service standards
Budget Hotels	Caters to travelers seeking affordable options with fewer amenities.	Affordable, broad customer base	Limited amenities, lower profit margins
Extended-stay Hotels	Designed for guests needing long-term accommodations, offering apartment-style living with kitchenettes and other amenities.	Ideal for business travelers, longer-term stays	Requires long-term guest retention, may involve higher maintenance costs

To decide which hotel business model is the best fit for you, consider factors like your budget, target market, and desired level of involvement in daily operations. Some models, like franchises, require a higher initial investment and ongoing fees but offer more brand recognition. Others, like independent hotels, provide more control but may require more effort to establish a customer base. 

Understanding the different models will help you decide which type of hotel aligns with your investment goals.

How much does it cost to buy a hotel?

The cost of buying a hotel can vary greatly depending on several factors. These include location, size, brand, and condition of the property. On top of that, there are several additional costs you need to consider, both upfront and ongoing.

The most significant upfront cost is the purchase price, which can vary widely based on the hotel’s location and the prominence of its brand. Prime locations and well-known brands come at a higher price, while smaller or less competitive hotels cost less.

Beyond the purchase price, renovation costs can add up. Simple upgrades or major overhauls may be needed, depending on the property’s condition. Operational costs, including utilities, insurance, property taxes, and technology, are ongoing expenses.

Moreover, legal fees should not be overlooked. Buying a hotel requires careful legal advice, covering contract reviews, due diligence, and ensuring compliance with local zoning regulations. Legal experts will guide you through the complexities of property laws.

Once the hotel is operational, you must consider the day-to-day running costs. These ongoing expenses include staffing, maintenance, and marketing, which are all integral to maintaining a high standard of service.

Now, the cost of buying a hotel is influenced by the type of hotel and its market positioning. Below are some median costs across different hotel categories, which can help guide your investment decisions:

• Limited-service and midscale extended-stay hotels: The median cost for these types of hotels falls in the range of $160,000 to $170,000 per room. These hotels often include well-known, popular brands and are more affordable compared to higher-end options
• Upscale extended-stay and select-service hotels: Hotels in these categories typically cost around $250,000 per room. These properties offer more amenities and services than limited-service hotels but are still relatively affordable compared to full-service and luxury hotels
• Dual-branded hotels: The median cost here is approximately $231,000 per room. These properties typically combine an extended-stay midscale or upscale brand with a select-service or limited-service brand, offering a variety of accommodations under one roof
• Full-service hotels: Developing full-service hotels tends to cost significantly more, with a median cost of over $400,000 per room. These properties offer a broader range of amenities, including on-site dining, meeting rooms, and concierge services
• Luxury hotels: The development cost is much higher, averaging over $1,000,000 per room. These properties cater to high-end clients and require substantial investment, making them less common due to the high costs associated with development

When it comes to financing options, several avenues are available, including:

• Bank loans: Traditional bank loans require a strong credit score, a solid business plan, and promising revenue projections
• SBA loans: The Small Business Administration (SBA) offers loans with lower interest rates and longer repayment periods, though approval takes time
• Private investors: If you’re looking to raise capital quickly, private investors may be an option. These investors provide capital in exchange for equity or a share of your hotel’s profits
• Crowdfunding: Crowdfunding is a growing trend where you raise funds from a large group of individual investors. In return, investors may receive a portion of your hotel’s profits

Strong revenue projections improve your chances of securing funding.

Things to consider when buying a hotel

So, you’ve evaluated the costs of buying the hotel, but now you’re wondering what other factors to consider. Beyond the price tag, several key elements can influence the success of your investment.

Location

Is the hotel centrally located, near downtown, shopping centers, a convention center, the beach, mountains, or popular local attractions? The property’s location has a significant impact on its performance, influencing room demand, seasonal trends, and the type of guests it can attract.

Hotels in prime locations typically experience higher occupancy rates, especially if they are close to major attractions or business districts. The location also influences the hotel’s appeal during different seasons, such as ski resorts being in demand during the winter or beachfront properties attracting summer vacationers. 

Hence, take time to evaluate not only the current demand but also future developments in the area that might impact your hotel’s performance.

Market demand analysis

Now, you need to understand the market demand in the area to guage the long-term success of your hotel. Is there a steady flow of tourists, business travelers, or both? 

Research the local market to identify trends in visitor numbers, seasonal peaks, and potential for growth. A good analysis will give you insights into occupancy rates, competition, and how well the area can sustain the hotel’s operations. 

If you’re considering a hotel in a growing area, market demand analysis can also help you anticipate changes in the economy, tourism, or development plans that could affect your investment.

Financial metrics

Before moving forward, make sure you’re comfortable with the hotel’s financial performance. Key financial metrics like occupancy rate, ADR (Average Daily Rate), and RevPAR (Revenue Per Available Room) are important indicators of the hotel’s ability to generate revenue.

For example, the occupancy rate will tell you how often rooms are being booked, while ADR reflects how much guests are paying on average. RevPAR combines both occupancy and rate to provide a comprehensive look at the hotel’s revenue performance.

At this stage, it’s only practical to use a calculator to explore these metrics further and understand their impact on your investment. Accessing this data will help you determine if your business model is viable or if you need to make adjustments to make your hotel profitable.

Independent hotel vs. Franchise

As discussed earlier, with an independent hotel (e.g., Hilton, Marriott, Holiday Inn), you have complete control over branding, operations, and guest experience. However, you’ll need to invest more time and money into marketing and building a reputation from scratch. 

On the other hand, a franchise provides a well-established brand, proven systems, and an easier path to attracting customers. Still, it comes with ongoing franchise fees and strict operational rules. 

Similarly, in an owner-operated hotel, you manage everything yourself, giving you complete control over operations. However, this requires significant time and expertise. With a management contract, you hire a third-party company to handle day-to-day operations, which can relieve some of the burdens but comes with management fees.

Weigh the flexibility and control of an independent hotel against the brand recognition and support of a franchise to determine what suits your goals. 

Regulatory requirements and legal due diligence

Before finalizing the purchase, understand the regulatory requirements and legal due diligence. Each location has its own zoning laws, licensing regulations, and health and safety standards. 

Hence, working with legal experts is crucial to ensure the property complies with local laws. They can also help identify any hidden issues, such as zoning restrictions or legal disputes, that might affect your ability to operate. 

Buying a hotel: Step-by-step process

Congratulations on taking that exciting step toward owning your very own hotel! Before you picture yourself managing a bustling lobby or checking in satisfied guests, it’s essential to break down the process step by step. 

Here’s a detailed guide to help you navigate the process and make informed, confident decisions.

1. Define your budget and financing strategy

Like any industry, you won’t get far in purchasing and running a business without having your finances in order. Do you have the capital available to buy the hotel outright, or will you need to seek financing?

Many aspiring hotel owners combine their own funds with a business loan to cover the full purchase price. If financing is necessary, you’ll likely need to prepare and present a business plan to banks, credit unions, or other credible lending institutions. If you have family or friends who can invest, consider partnering with them.

Once your financing is in place, you’ll have a clearer idea of the type of property you can afford. While having a dream hotel in mind is tempting, without proper financial backing, that dream can remain just that—a dream.

2. Research potential properties and conduct feasibility studies

Next, you must research various properties that fit your budget and investment goals. Are you interested in a high-traffic urban location or a more serene, remote area? Your decision will determine the hotel’s customer base, seasonal trends, and overall performance. 

It’s also critical to conduct feasibility studies. Look at the local competition, the property’s history, and demand in the area. 

For example, if you’re considering a beach resort, look at how well similar properties perform during peak seasons. Feasibility studies can help you gauge whether your investment will yield the returns you’re hoping for.

3. Perform due diligence: hotel condition, financial statements, existing contracts

At this stage, you’ll review the hotel’s financials, including profit and loss statements from the past few years, assuming the property has been operational. You’ll also investigate any legal matters tied to the property, such as existing contracts, liabilities, debts, and assets.

If the hotel has long-term contracts, it’s important to review them and understand the potential impact on your ownership. If the property is part of a franchise agreement, have a lawyer assess the terms to determine how it may affect the sale.

Zoning requirements are another key consideration. Make sure there are no hidden conditions or restrictions that could complicate your plans down the line. For example, ensure there are no undisclosed liens or legal claims on the property—an issue that could potentially derail your purchase.

Additionally, address any issues uncovered during the property inspection. If repairs are needed, you may request that the seller make necessary fixes before you proceed with the deal. If the seller is unwilling to address these issues, it could provide leverage to lower your offer.

4. Secure financing and negotiate the purchase

Once you’ve reviewed your options and narrowed down a property, it’s time to secure financing and start negotiating. If you’re financing the purchase with a bank loan or investor capital, you’ll need to present your business plan and detailed financial projections. 

During negotiations, don’t be afraid to ask for concessions or to propose changes to the terms if the property needs significant work. Negotiating well can save you money upfront and set you up for long-term success. Once the terms are agreed upon, finalize the purchase agreement.

5. Obtain necessary licenses and permits

After securing financing and negotiating the purchase, it’s time to handle the regulatory side of things. Different locations have varying zoning laws, health regulations, and licensing requirements. 

Make sure you understand all the necessary permits and licenses you’ll need to operate the hotel legally. This could include everything from fire safety certifications to food handling permits if the hotel has a restaurant or bar. 

Work closely with a legal expert or consultant to ensure compliance with local regulations. Failure to comply can result in fines, delays, or even property loss, so don’t rush through this step.

6. Invest in the right tech stack

One of the most important steps when buying a hotel is to verify the property has the right tech infrastructure. You don’t want to start with an empty calendar.

Along with a professional website and a direct booking engine, a channel manager will help expand your reach and attract guests from all over. innQuest is an all-in-one hotel management software that offers a cloud-based property management system (PMS) like roomMaster, which can integrate with booking platforms, payment systems, and guest communication tools.  

An effective PMS simplifies tasks like check-ins, reservations, guest billing, and housekeeping. This system will not only make your operations more efficient but will also enhance the guest experience. Additionally, using tools like automated check-ins or self-service kiosks allows your guests to move smoothly through the check-in process, reducing wait times and improving satisfaction. 

Read More: A Comprehensive Guide To Hotel Booking Engine: Key Functions And Top 7 Software Providers

7. Develop an operational and revenue strategy

Now that the property and the legal side are squared away, it’s time to develop a solid operational plan. How will you manage day-to-day activities? Will you hire a property management team, or will you oversee operations yourself?  

To maximize profits, you’ll need to manage rates carefully. Consider employing a dynamic pricing model that adjusts rates based on demand, time of year, and local events. 

Additionally, think about how you’ll market your hotel—will you focus on online travel agencies (OTAs) like Booking.com and Expedia, or will you encourage direct bookings through your own website? 

A robust marketing and revenue strategy will help you attract guests, increase occupancy, and optimize revenue per available room (RevPAR).

8. Finalize the purchase and transition into ownership

Once the seller accepts your bid, it’s time to begin the closing process. The process may seem overwhelming at times, but it’s necessary to finalize the transaction and take ownership of the property legally.

Your lawyer and realtor will help guide you through each step. Don’t hesitate to ask questions or request clarification if something isn’t clear. It’s important to understand what you’re signing.

For example, if you’re taking over an existing hotel, understand the current guest base and operating procedures. Conversely, if you’re making significant changes or renovations, communicate these plans to the staff and guests in advance. 

Once the closing date arrives and everything is in order, you’ll officially own your new hotel. This moment is the joint effort of your hard work, planning, and patience. Now, it’s time to focus on making your hotel appealing to potential guests, building a strong reputation, and positioning it as a beloved destination in your community.

Choosing the Right Hotel Business Model

• Franchise hotel (e.g., Hilton, Marriott, Holiday Inn) – Benefits and obligations.
• Independent hotel – More flexibility but higher risk.
• Management contracts vs. owner-operated hotels.

Do you need a hotel management company?

Running a hotel is no small feat. Managing daily operations, keeping up with guest services, and optimizing revenue can feel overwhelming. A hotel management company can step in to help take the load off. 

However, with the right technology, you can manage most of these tasks yourself, streamline operations, and improve guest experiences—all while maintaining control. 

Daily Operations and Guest Services

A hotel management software will handle the day-to-day operations, ensuring your hotel runs smoothly. They manage staffing, front desk services, and ensure the guest experience remains top-notch. But you don’t have to hire a management company to offer exceptional service. 

With InnQuest’s roomMaster™, you can easily manage bookings, billing, housekeeping, and check-in/out processes—on-site or remotely. The intuitive, cloud-based system allows your team to work seamlessly from any device, making operations simpler and more efficient.

Marketing, sales, and OTA distribution

Marketing and sales are crucial components of attracting guests. InnQuest’s Stayfull™ channel manager simplifies this process by centralizing all OTA connections, allowing you to manage inventory and pricing across 155+ global OTAs, including Booking.com, Expedia, and Airbnb. 

This helps avoid overbookings, optimizes your presence, and ultimately drives more bookings.

Read More: How To Choose A Best Channel Manager For Small Hotels?

Vendor relationships and reporting

A hotel management company will also take care of vendor relationships so that you get the best deals on everything from supplies to maintenance services. They also manage cost control and provide in-depth reporting. 

However, the performance reporter in InnQuest will help you gain real-time insights into occupancy, guest behavior, and profitability. Plus, the analytical tools in roomMaster™ allow you to track important metrics, define more targeted packages, and anticipate guest needs—just like a management company would.

With these tools, you can reduce reliance on third parties and focus more on the guest experience and business growth.

How to optimize hotel revenue for maximum profitability?

Now, the most important responsibility of any management company is revenue management. 

To achieve this, you need effective revenue management tools that allow for dynamic pricing and accurate performance tracking. These tools help set competitive rates based on real-time data, allowing you to adjust pricing based on demand, occupancy, and market trends.

InnQuest’s revenue management system offers a powerful AI-driven pricing model designed to increase your ADR and RevPAR. With demand forecasting, it anticipates fluctuations in market demand, so you can adjust prices accordingly. 

The system also provides automated revenue adjustments, ensuring your rates remain aligned with market conditions without constant manual intervention. This approach helps you stay agile, competitive, and profitable, driving consistent revenue growth.

Your roadmap to hotel ownership with innQuest

And there you have it—a comprehensive guide to starting your own hotel! The journey from dreaming about owning a property to making that dream a reality is full of excitement, challenges, and key moments.

Once you’ve laid the groundwork and prepared for the big step, you’ll need the right financial strategy in place, effective revenue management tools, and technology solutions to set yourself up for long-term success.  

InnQuest’s channel manager and revenue optimization tools will help you manage your OTA relationships, optimize pricing, and drive profitability immediately. Plus, with our booking engine and hotel website builder, you’ll have the perfect platform to attract direct bookings, reduce commission fees, and build your online presence.

Ready to turn your dream into a thriving reality? Start your journey today with InnQuest’s hotel management solutions!

FAQs

How much does it cost to buy a hotel, and what factors influence pricing?

Hotel costs vary widely based on location, size, condition, and brand. Prime locations or high-end properties are more expensive. Consider additional costs like renovations, operational expenses, legal fees, and ongoing maintenance. Your overall investment aligns with the property’s revenue potential and market demand.

What are the key things to consider when buying a hotel?

When you’re buying a hotel, it’s important to evaluate factors like location, market demand, and the condition of the property. Understand the financial metrics such as occupancy rate, average daily rate (ADR), and revenue per available room (RevPAR). You should also decide whether you want to invest in an independent hotel or a franchise. Don’t forget to look for the necessary licenses, permits, and legal due diligence. Also, think about the kind of technology you’ll need to optimize operations, like a property management system and channel manager.

What hotel business models should I consider as an investor?

As an investor, you can choose from various models: boutique hotels for personalized experiences, franchise hotels for brand recognition, independent hotels for full autonomy, luxury hotels for high returns, budget hotels for affordability, and extended-stay hotels for long-term guests. 

Do I need a hotel management company to operate my property?

Outsourcing is a good option if you’re new to the industry or want to minimize daily operational involvement. It can improve efficiency, guest satisfaction, and profitability. Hotel management experts can handle staffing, guest services, revenue management, and marketing. 

How can hotel revenue management tools and channel manager software improve my hotel’s profitability?

Revenue management tools and channel manager software help optimize pricing, distribution, and occupancy. By managing OTA relationships, updating rates in real time, and preventing overbooking, you can increase profits. These tools also improve efficiency and help you target the right guests, maximizing revenue while minimizing operational complexity.