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Buying a mini-hotel abroad

Mini-hotel is a hotel, the number of rooms of which is not more than 30 rooms. Typically, these institutions provide services on the system Bed and Breakfast (with the English. “Bed and Breakfast”). Many tourists feel more comfortable in small hotels than in large ones, so mini-hotels firmly occupy their niche in the hotel business.

Mini-hotel is not a passive investment, but work
Before deciding to buy a mini-hotel, you need to answer the question: “Do I want to engage in the hotel business?” If the owner is not ready to move abroad and manage the property on his own, instead of a mini-hotel, it is better to purchase several apartments for rent. The fact is that a professional management company will not engage in a hotel with a fund of less than 100 rooms. Of course, you can hire a manager, but then to pay for his services will take a large share of the profits.

Case study: three years ago, a Russian family purchased a mini-hotel in Austria with the help of one of Tranio’s partners. Future hoteliers first considered objects in the Alps, but ultimately made a choice in favor of a picturesque town in Lower Austria. The small hotel is conveniently located near the center and local attractions, is popular with tourists and has a high rating on Booking.com. The hotel brings profit to investors, but to entrust its management to a professional company does not make economic sense. Owners invest in an Austrian hotel a lot of time and money, without stopping to engage in the main business in Russia. As the next stage of development of their Austrian enterprise, they planned a large reconstruction and restructuring of the old room stock into individual apartments, which would be sold to investors using the buy-to-let system (from English “buy to rent”).

How to choose a mini-hotel
When buying a mini-hotel, you need to consider a number of factors important to this type of business.

Location
Loading mini-hotels, which are located on the sea or ski resorts, is highly dependent on the season. The owners receive the lion’s share of the profits during the peak months, which doesn’t cancel the cost of hotel maintenance at other times. It is recommended to buy mini-hotels in places with year-round demand, for example, in large cities. In this case, the business will not depend on the seasonal factor (but you can face high competition).

The development of infrastructure is also important. Well, if guests can easily get to the main attractions, entertainment venues, train stations and airports. It makes sense to pay attention to the mini-hotels in Germany: the Germans love to travel in their own country. If funds allow, you can ask the price of small hotels in the alpine ski resorts. You can also consider offers in warm areas where Russians like to spend holidays: in Spain, Italy and Montenegro. The absence of a language barrier is a definite plus of working with compatriot clients.

Building
Choosing a location, it is important to find a hotel in good condition. It is better to buy a new and beautiful building, for living in which people will be willing to pay good money. The old building, firstly, will bring less profit, and secondly, it will still require additional repair costs.

However, there are examples of successful reconstruction and management of such hotels. For example, investors in Spain restored and turned into a mini-hotel with two spacious rooms, a house of the XVI century. Tourists like the combination of an old mansion and modern technology. Rent one room costs 300 euros per night. The hotel has a good location: the hotel is located in Catalonia, in the picturesque city of Girona. From here it is easy to get to Barcelona and to the ski resorts of Spain. It is beneficial to acquire such objects if their price is lower than the market price and the buyer has the means for complete reconstruction. The yield of successful redevelopment projects averages 10–15%.

Financial condition
When buying, you should study the accounting and financial statements of the hotel. To access this information, you must write to the seller a letter of intent (Letter of Intent, LOI), in which the buyer declares his desire to purchase real estate.

A key indicator of hotel business efficiency is RevPAR (Revenue per Available Room Per Day) – the average income per room, taking into account the occupancy of the hotel. For example, according to CBRE consulting company, for 2017, although the average daily cost of rooms in Hamburg is lower than in Frankfurt (118 euros versus 123 euros), thanks to higher occupancy rates (80% versus 70%), Hamburg hoteliers receive more income than Frankfurt’s : RevPAR in the first case is equal to 95 euros, in the second – 85 euros.

Frames
Regardless of what you decide to open, a boutique hotel or a cheap boarding house, the most important trump card of a small hotel is in attentive attitude to each client. Many guests stay again and again in the same mini-hotel just because they feel welcome guests in it.

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