Thread by @somehotelguy

1/17 De-Risking Hotel Acquisitions Thread 1:

First focus is on the value-add, and narrowing my risk profile there. The renovation is likely driven mostly by the new brand’s PIP and any material requirements of the new operator, along with any value add items my team identifies.

2/17 Before getting to anything specific process-wise, this is absolutely critical: TOUR THE HOTEL WITH AN ENGINEER. Take as much time as you want. See as much as you can. Take good notes. Take photos.

3/17 Do not rely on seller reps as to conditions, mechanicals, etc. Initially post-tour, I’ll generally price out the PIP as-is with a couple trusted purchasing agents, adding consultant fees, installation, contingency, and warehousing / tax / freight markups based on prior…

4/17 …projects. This gives me a baseline, and this begins the work on a few different fronts, running roughly simultaneously: brand discussions / negotiations, management negotiations, takeover plans, and renovation plans.

5/17 From a Brand perspective, I want to: (a) ensure continuity of reservations system access as I transition from one brand to the next (e.g. making sure I can join the new brand before completing the PIP, joining the new brand family’s res system “white label” / unbranded, or…

6/17 …making sure the existing brand will let me stay while I do the work); (b) understand the brand-related transition costs (IT, OS&E, signage, up-front fees); (c) establish a basic bid/ask on my franchise terms (term, fees, any key money or incentives, etc.); and, (d)…

7/17 …negotiate the PIP (what can I get pulled? can I get it phased?). Ideally I’ve firmed up multiple key capital needs while reducing the cost of my required renovation.

8/17 Further, I’ve refined parts of my operating expense model while hopefully securing some brand incentives to juice my returns.

9/17 On the Management, I need to establish: (a) their operating proforma vs mine, understand how they see upside, and ensure alignment of business plan (more on this later); (b) deal terms (fees, term, incentives); and, (c) transition costs (staffing, task force, system…

10/17 …implementation, etc.). With this process, I’ve confirmed business plan alignment, shored up my expense model further (while hopefully finding some incentives to juice returns), and continued to narrow the risks on my up-front capital spend.

11/17 On Transition Plan, I need to firm up the management takeover critical path and checklist - this includes everything from lead time for staffing changes to cash reconciliations to software / hardware installations.

12/17 This needs to tie intimately with the overall renovation plan, whose timing will drive sales decisions (when to go after what clients, what revenue channels to open), marketing decisions (PR around transition / upgrade, guest communication, web launch, etc.), hiring…

13/17 …decisions, brand-change timing, etc.

14/17 The Renovation Plan is absolutely critical, and with the initial PIP (start with the largest scope of work - it’s easier to remove things than add) plus my / my operator’s value add needs, I start talking to experts in addition to the purchasing agent.

15/17 I’ll loop in interior designer(s), architect(s) (as needed), GCs, and other needed consultants. Goal is to narrow my potential cost window and firm up renovation timeline.

16/17 Also critical - once consultants are selected, getting EVERYTHING in writing... schedule, cost, milestones, deliverables, etc. This will feed into every item above as well - when the work gets done will inform when and how I can transition brands; and, the disruption…

17/17 …caused will inform my proforma, my transition, etc.

@threadreaderapp unroll