Buying a Hotel Case Study
Owning your own hotel remains one of the most popular ways to start a new business.
For some, a people-orientated existence in some tranquil corner of Britain seems like the ideal escape route from city life. For others, it would purely be a profitable business in a sector they have worked in all their lives.
Every year thousands of people - ranging from the semi-retired couple to the lifelong hospitality professional - buy guest houses or hotels, with the businesses as varied as the buyers.
With tourism in Britain now fully recovered from the Foot and Mouth fiasco, now could be the ideal time to launch yourself into the market.
Martin King, head of the commercial department at Waycotts in Torquay, says that the hotel market in South Devon is very buoyant, with prices still increasing. This week alone, he has sold one 15-bedroom and one 38-bedroom hotel.
"It's very much a job that people either love or hate," he explains. "A lot of people come down and buy a small guest house. Those who enjoy it will prosper, but some just can't cope with the lifestyle. The vast majority, however, do quite nicely. The main thing is not to come down with too big a borrowing."
"It's a very good lifestyle," he adds. "With a 7-8 bedroom guest house you could turn over about £45,000 a year, based on an average of £5,000 - £6,500 per bedroom." This sort of scale will suit a semi-retired couple, he says, who can expect to convert about 50% of the turnover to profit.
Above the VAT registration limit of £55,000, however, the nature of the business changes profoundly. There is a 'gap' in which the business is unviable, as the extra proceeds end up in the taxman's pockets due to the 17.5% which has to be added to all bills.
Hotels only become sensible propositions again once you pass the £100,000-turnover mark, which roughly corresponds to 16 bedrooms. Once you reach that size, King says, you can choose to employ additional staff, such as chefs and receptionists. He adds that the 38-bedroom hotel was sold for around £900,000.
King does have a warning, though. "People think it's a 12-hour day. But it's not - it's a 17-hour day, 7 days a week. You've got to be a people person, you need to be able to deal with the general public continuously."
With the exception of year-round hotspots such as London or Edinburgh, seasonality remains one of the biggest issues for a hotelier. In Devon, for example, trade is brisk in July and August while November and February are much quieter.
Buyers should also be aware of how tourism as an industry has changed since the halcyon days of the British seaside resort.
With the fortnight break on the Costas so affordable to most families, the typical long break in Britain is most popular either among elderly people or those with very young children.
Meanwhile, the short break at home has never been more popular, especially with budget flights making far-flung destinations such as Scotland or Cornwall more accessible.
But the cheap cost of flying has made destinations on the continent more accessible, too - so visitors to a particular area often have a particular reason for being there.
Visitors might be attracted to the Peak District for some of the world's best rock-climbing; they might visit Mid-Wales for a particular poetry or jazz festival; or they could be in Cornwall or Whitby not for the usual seaside attractions but to walk a long-distance path.
The key to running a successful new hotel is to understand your potential clientele. Some even target a particular section of society - there are thriving hotels in Manchester and Brighton devoted entirely to the gay community.
Also, awareness of and interest in food has increased dramatically in Britain over the past decade and a good meal is now seen as the highlight of a weekend rather than a drab necessity.
Adding a restaurant, or improving the existing offering, is one way to revive a flagging business, and attract non-residents as well as your guests. With second-home ownership at an all-time high, this is one way to capitalise on holidaymakers who have their own accommodation, as well as locals.
But nothing can really compensate for the level of service and welcome you give your customers - which will often depend on whether you are a "people person" and not Basil Fawlty.
This is the sure-fire way to good reviews, repeat business and good reports to friends and family - the bedrock of any hotel success. And who could turn down the idea of a successful business dealing with satisfied people in idyllic surroundings?
For some, a people-orientated existence in some tranquil corner of Britain seems like the ideal escape route from city life. For others, it would purely be a profitable business in a sector they have worked in all their lives.
Every year thousands of people - ranging from the semi-retired couple to the lifelong hospitality professional - buy guest houses or hotels, with the businesses as varied as the buyers.
With tourism in Britain now fully recovered from the Foot and Mouth fiasco, now could be the ideal time to launch yourself into the market.
Martin King, head of the commercial department at Waycotts in Torquay, says that the hotel market in South Devon is very buoyant, with prices still increasing. This week alone, he has sold one 15-bedroom and one 38-bedroom hotel.
"It's very much a job that people either love or hate," he explains. "A lot of people come down and buy a small guest house. Those who enjoy it will prosper, but some just can't cope with the lifestyle. The vast majority, however, do quite nicely. The main thing is not to come down with too big a borrowing."
"It's a very good lifestyle," he adds. "With a 7-8 bedroom guest house you could turn over about £45,000 a year, based on an average of £5,000 - £6,500 per bedroom." This sort of scale will suit a semi-retired couple, he says, who can expect to convert about 50% of the turnover to profit.
Above the VAT registration limit of £55,000, however, the nature of the business changes profoundly. There is a 'gap' in which the business is unviable, as the extra proceeds end up in the taxman's pockets due to the 17.5% which has to be added to all bills.
Hotels only become sensible propositions again once you pass the £100,000-turnover mark, which roughly corresponds to 16 bedrooms. Once you reach that size, King says, you can choose to employ additional staff, such as chefs and receptionists. He adds that the 38-bedroom hotel was sold for around £900,000.
King does have a warning, though. "People think it's a 12-hour day. But it's not - it's a 17-hour day, 7 days a week. You've got to be a people person, you need to be able to deal with the general public continuously."
With the exception of year-round hotspots such as London or Edinburgh, seasonality remains one of the biggest issues for a hotelier. In Devon, for example, trade is brisk in July and August while November and February are much quieter.
Buyers should also be aware of how tourism as an industry has changed since the halcyon days of the British seaside resort.
With the fortnight break on the Costas so affordable to most families, the typical long break in Britain is most popular either among elderly people or those with very young children.
Meanwhile, the short break at home has never been more popular, especially with budget flights making far-flung destinations such as Scotland or Cornwall more accessible.
But the cheap cost of flying has made destinations on the continent more accessible, too - so visitors to a particular area often have a particular reason for being there.
Visitors might be attracted to the Peak District for some of the world's best rock-climbing; they might visit Mid-Wales for a particular poetry or jazz festival; or they could be in Cornwall or Whitby not for the usual seaside attractions but to walk a long-distance path.
The key to running a successful new hotel is to understand your potential clientele. Some even target a particular section of society - there are thriving hotels in Manchester and Brighton devoted entirely to the gay community.
Also, awareness of and interest in food has increased dramatically in Britain over the past decade and a good meal is now seen as the highlight of a weekend rather than a drab necessity.
Adding a restaurant, or improving the existing offering, is one way to revive a flagging business, and attract non-residents as well as your guests. With second-home ownership at an all-time high, this is one way to capitalise on holidaymakers who have their own accommodation, as well as locals.
But nothing can really compensate for the level of service and welcome you give your customers - which will often depend on whether you are a "people person" and not Basil Fawlty.
This is the sure-fire way to good reviews, repeat business and good reports to friends and family - the bedrock of any hotel success. And who could turn down the idea of a successful business dealing with satisfied people in idyllic surroundings?
The star rating system
Approved by the RAC, AA and the English Tourism Council.
One Star:
Practical accommodation with a limited range of facilities and services, but a high standard of cleanliness throughout. Restaurant/eating area. 75% of bedrooms will have en-suite or private facilities.
Two Stars:
Better equipped bedrooms, all with ensuite/private bathroom and a colour TV. A lift is normally available.
Three Stars:
Higher standard of services and facilities including larger public areas and bedrooms, a receptionist, room service, laundry.
Four Stars:
Accommodation offering superior comfort and quality; all bedrooms with en-suite bath, fitted overhead shower and WC. Spacious and well appointed public areas. More emphasis on food and drink. Room service of all meals and 24 hour drinks, refreshments and snacks. Dry cleaning service available. Excellent customer service.
Five Stars:
A spacious, luxurious establishment offering you the highest international quality of accommodation, facilities, services and cuisine. There will be a range of extra facilities. You will feel very well cared for by professional, attentive staff providing flawless guest services.
One Star:
Practical accommodation with a limited range of facilities and services, but a high standard of cleanliness throughout. Restaurant/eating area. 75% of bedrooms will have en-suite or private facilities.
Two Stars:
Better equipped bedrooms, all with ensuite/private bathroom and a colour TV. A lift is normally available.
Three Stars:
Higher standard of services and facilities including larger public areas and bedrooms, a receptionist, room service, laundry.
Four Stars:
Accommodation offering superior comfort and quality; all bedrooms with en-suite bath, fitted overhead shower and WC. Spacious and well appointed public areas. More emphasis on food and drink. Room service of all meals and 24 hour drinks, refreshments and snacks. Dry cleaning service available. Excellent customer service.
Five Stars:
A spacious, luxurious establishment offering you the highest international quality of accommodation, facilities, services and cuisine. There will be a range of extra facilities. You will feel very well cared for by professional, attentive staff providing flawless guest services.