Subtleties of conducting hotel business in Europe
Purchase of hotel in Europe – the good business idea which can bring you up to 10 annual interest rates. But before it it is important to deal with questions: where it is the best of all to purchase hotel whether to be engaged in independent management or only to invest in the ready project, to purchase the "promoted" hotel or just the building for further reconstruction? Let's try to understand that to what …
Where it is profitable to buy hotels?
What countries are popular for investments into hotel business? It is the first question by which it is worth being set. The countries of Central Europe with stable economy are most attractive. Switzerland can brag not only stable currency, but also year-round inflow of tourists. It is possible to purchase spacious and modern hotel on 40 bedrooms in the popular resort of Adelboden (Switzerland) with the budget to 2,500,000 euros. The hotel is liquid all the year round, a wide choice of winter and summer types of entertainments here. Options and absolutely small and cozy hotels like unique hotel in Ticino, italoyazychny canton in the south of Switzerland are possible. The project budget – up to 1,000,000 euros. This special place combining the Italian hospitality and the Swiss stability.
Other interesting direction is Austria. So, smart the hotel in Baden on 38 bedrooms can cost 7,000,000 euros. The proximity of the well-known and largest casino in Europe does this place especially attractive. The building of the 1890th year of construction was completely reconstructed in 2014!
Other demanded directions – it is traditional Germany and France. However we will look at the southwest of Europe. Here it is possible to allocate Spain, Italy and Portugal. Spain breaks all records on attendance tourists. As experts advise, in Italy it is worth looking narrowly at hotels in mountain regions of the country. Also Portugal with its extraordinary beauty and magnificent climate attracts investors. Realtors notice that today in Portugal it is the most profitable to purchase the real estate for the subsequent reconstruction. The state creates interesting programs for investors and invests own money in development of infrastructure of buildings. In general, it is possible to purchase wonderful hotel, for example, on the ocean coast in Santo Andre for 864,000 euros.
Large format or small hotel?
Specialists in the sphere of sale of a commercial real estate divide hotels into several types:
- hotels up to 20 numbers (small) - cost are from 500,000 euros up to 1,500,000 euros;
- hotels up to 50 numbers – cost 2 000 000 - 5 000 000 euro;
- large luxury hotels – cost are from 5,000,000 euros.
Statistics such is that 60 percent of lodgers service large hotels, other 40 percent — a niche of small formats.
The small format is very widespread in Europe. Generally it is family business in which all family members are involved. And it, in turn, allows to lower costs as much as possible. Other benefit of small hotels is an opportunity to create unique and very comfortable atmosphere. It with success can compensate lack of the fitness center, casino or the pool! Small hotels allow to optimize range of services, to quickly control their quality and quantity and also to choose the most effective ratio of number of employees and visitors.
It is possible to distinguish from small hotels:
- democratic hostels,
- home hotels,
- hotels the house-keeper - and a business class,
- apart-hotels (with author's interior design, elite arrangement, exclusive services, availability of the level numbers "luxury").
What to buy: the "promoted" hotel or the building?
Purchase of the building under further reconstruction will allow to save significantly. But important conditions: availability at the investor of experience of conducting hotel business, knowledge of local mentality, language, ability to use the state grants, mortgage loans. Accurately worked business plan in which expenditure for repair, equipment procurement, obtaining the corresponding permissions, promotion of hotel, etc. will be considered is important. Upon purchase of ready business, the volume of investment will be higher, however, as well as profit. The good operating hotels cheap are not on sale. It is necessary only to choose: to purchase luxury hotel in Tuscany or an ancient mill hotel in Schwarzwald!? The question price – from 2,000,000 to 5,000,000 euros.
Anyway, by consideration of different options, try to look at your future hotel from the point of view of the client. Analyse whether it is convenient to reach it, whether good kitchen in an institution, whether comfortable numbers?
Profitability from investments
Average value across Europe – 5 percent. However final income will be influenced by such factors as level of hotel, the area, popularity, availability of personnel, etc. 7 annual interest rates are considered a good indicator. Independent and effective management it is possible to achieve 10 percent a year. It is possible to increase this figure at the expense of cheap credit products.
To operate most or to find managing company?
The independent management will suit those who know the local legislation, subtleties of hotel business, is able and likes to work hard. If in hotel there is a restaurant, it is necessary to understand as well this sphere.
Otherwise experts advise to purchase already working hotel with the acquired base of clients and the adjusted business communications. Within one or two years, with active participation in life of hotel, the owner will be able to learn subtleties of business and is later than its message already independently to reduce costs on management.
In all other cases it is necessary to involve the specialized company in management. The realtor agency will help to pick up it. The choice of managing company in many respects also depends on category of hotel and its orientation: individual tourism, groups, business segment … Anyway, if hotel large, from 5 million euros, then the checked firm organizes the sequence of all necessary works, will think over logistics of flows of clients and other components of successful performance of the enterprise.
Attraction of borrowing facilities
It is no secret that in the certain countries of Europe state agencies can demand the documents proving legality of origin of finance of the investor. Certainly, if it is about the amount up to 300,000 euros, then some buyers submit documents on business income, sale of the apartment, etc. But often to prove legality of origin of means from 5,000,000 euros and it is extremely difficult above. In this case investors prefer to issue a mortgage loan. In the majority of the European countries it is possible to obtain the credit for purchase of hotel.
In Germany, for example, affirmative answer on request on the credit can be received at positive balance of hotel for the last three years and a post-tax profit not less than 30,000 euros a year. In Switzerland where on purchase of a commercial real estate low credit rates are provided, approval on the credit will arrive only after careful check of the investor on reliability. But also the prices of hotels are high here: for example, the popular 3-star hotel in Valais will cost 3,300,000 euros. In Portugal also the market of mortgage lending endures serious rise. In recent years banks issue the credits for purchase of the real estate more and more willingly.
Acquisitions of hotel: budget?
Project cost of a commercial real estate strongly differs from location, a state, the number of rooms, etc. The average budget in Europe makes from 1,500,000 euros. In Switzerland it is possible to purchase profitable hotel from 2,500,000 euros. The cozy hotel in Austria near ski slopes will cost 1,200,000 euros. In Germany wide spacing of the prices. Here it is possible to purchase a marvelous Spa hotel in Lower Saxony at the price in 395,000 euros. And it is possible to meet also absolutely tremendous offers, like high-class hotel on 75 rooms for 9,000,000 euros. As a rule, the cost of really profitable object will vary from 2,000,000 to 5,000,000 euros. In Portugal similar objects in attractive areas can cost from 4,000,000 to 10,000,000 euros.
The important rule of the successful investor – you should not pursue the cheapest offer. Such option can turn back serious difficulties and additional costs.
The choice, purchase of hotel and business in this segment of the market – difficult tasks even for skilled investors. It is important not to allow emotions to win. Yours common sense, logic in a tandem with knowledge of experts of AWAY REALTY will always help to make the right decision!
