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If you own a hotel and are thinking about selling it, there are various important factors to take into account such as your potential tax liability, how to prepare the property for sale, and how to find buyers fast. This guide offers top tips for each of these issues, along with advice on the best options available for improving your chances of selling your hotel quickly.
- Which properties meet the definition of a hotel in the UK?
- Important tax issues to learn about selling a hotel
- Typical questions buyers might have about your hotel
- Simple steps to make your hotel more attractive when selling
- Deciding on how you want to sell your hotel
- Frequently asked questions about selling a hotel
Which properties meet the definition of a hotel in the UK?
Hotels are freehold or leasehold properties located throughout the UK, in city centres, rural locations, suburbs and more, where people pay to stay for one or several nights.
Sometimes, breakfast will be provided for free or offered at a price, which can make hotels similar to bed and breakfast properties or guest houses. However, for the purposes of selling property, hotels are typically those buildings that have dozens or even hundreds of rooms, whereas guest houses or bed and breakfasts usually only have a few rooms for visitors, and minimal or no amenities.
With a hotel, you might find one or more bars or restaurants on site, a gym, swimming pool and other facilities for guests, room service options and more. It’s not necessary for a property to have all of these and more qualities to be a hotel, but it can be a useful guideline.
The UK government sometimes offers definitions of hotels through regulation or legislation. By way of example, it has a website (describing when a hotel owner might be liable for paying Value Added Tax. It says hotels are generally defined as "Commercial establishments providing lodging (furnished sleeping accommodation) and possibly meals and other facilities such as laundry services, communal TV or rest rooms and phone services for guests and visitors."
As explained above, the website also notes that, "An establishment does not have to provide food or other facilities to be regarded as a hotel, inn or boarding house."
The rest of this guide explains the various tax issues that you might face when trying to sell a hotel, along with how to increase your prospects of finding a buyer, the speed and time involved with different methods of selling, and frequently asked questions about selling a hotel.
Important tax issues to learn about selling a hotel
The previous section of this guide noted that the government has a website that details situations in which a hotel owner might be liable for paying Value Added Tax on their business, but that’s just one of several tax issues that buyers and sellers should know.
Always consult with a tax professional to get a completely accurate picture of which taxes you might currently have to pay, and that could apply when you successfully sell your hotel.
Potential buyers are likely to ask you questions about the taxes that they might have to pay if they were to purchase your property. Knowing the answers to these questions upfront can help to make a sale more likely, compared to having to spend some time finding out the answers, as it’s possible that a buyer might lose interest the longer that they have to wait for your responses to their tax queries.
Income Tax: Even if you have only owned your hotel for a few months, you will likely be familiar with your duty to pay Income Tax, which is a percentage of the earnings that you take in from the money that guests pay to stay in your hotel’s bedrooms. The rate of income tax that you’ll have to pay will depend on how much revenue your hotel takes in during a given financial year, with higher rates of tax applying concurrently with greater amounts of annual revenue.
Value Added Tax: The government charges this fee on many different services, which includes hotels providing rooms to paying guests. There are some very limited situations in which businesses might be able to claim a reduction in the amount of Value Added Tax or even avoid having to pay it, but the vast majority of hotels will likely be liable for it. As always, a tax professional is the best person to ask about what you might owe the government for this tax.
Capital Gains Tax: You might have to pay this tax once you sell your hotel, depending on the price at which it sells. This tax applies to the gain, or profit, that you make when selling an asset, like property, compared to the original price that you paid for it.
Typical questions buyers might have about your hotel
You might find that there are several buyers interested in your hotel when you decide to sell it. That’s because of an increase in "staycations" where an ever-growing number of people in the UK are deciding to take their summer holidays and other breaks domestically, because it can save money compared to often far more expensive trips to other countries.
This growth in the staycation industry has naturally increased demand for more hotels, guest houses, inns, bed and breakfasts and other properties to provide rooms for people to use on their holidays. If your hotel is located in a popular tourist area, demand might be even greater from buyers.
When someone is considering making an offer to buy your hotel, they might have some queries about the property that you should try to answer immediately. Consider reviewing your financial documents and other paperwork so that you can be prepared to respond to any questions right away, as the longer that you wait to respond, the more chance a buyer might lose interest.
Below you’ll find a handful of the typical questions that buyers might have about a hotel they’re thinking about purchasing, as well as tips on how to best provide a complete answer.
What is the reason behind you wanting to sell your hotel now?
This is likely to be one of the main questions that a buyer will ask, because they’ll be curious about the reason why you want to sell. It could be that the daily stress and work involved with running a hotel is something you no longer want to endure, or you might need funds to retire, or any other reason. Buyers will want to know what your visitor rates have been like, as they will likely be wary of making an offer to buy any hotel that you are trying to sell because it rarely has any guests and always makes a loss.
Is there any possibility of expanding the size of the hotel in the future?
Some hotels are limited in size because of their existing location, and there might not be any good options for physically expanding the property in the future. But properties where expansions could be possible might be seen as a good investment, because buyers could build more rooms and increase their revenue. Tell buyers if you have planning permission for an expansion, as this might help secure a sale.
Are there are any structural faults with the hotel that need fixing?
It is crucial that you be completely honest with buyers about any physical problems with the hotel that are unresolved, which can include dry rot, subsidence and other issues. If someone purchases your property and then discovers a structural problem later, they can sue you for penalties. Be aware that buyers might lower their asking price by the amount of whatever they would have to pay for fixing any problems with your hotel.
Simple steps to make your hotel more attractive when selling
When you’re trying to sell a hotel, or any type of property, the goal should be to make it appear as valuable as possible to buyers, and there are some easy low-cost or zero-cost steps you can take to achieve this.
This can include mowing any garden that your motel might have in order to remove weeds and give the outside of the property a welcoming appearance, fixing any small damage like chipped paint, broken windows or missing roof tiles if you hotel has a tiled roof, and other simple repairs and improvements that can have the effect of increasing the perceived value of your property.
Similarly, you should also try to remove clutter from the guest rooms and hotel common areas, so that every part of the inside of the property looks as spacious as possible, because this can result in buyers thinking that the hotel is more valuable than a messy, cluttered property.
It’s possible that your hotel might also have some much larger scale problems, such as having storm-damaged rooms that you have not yet repaired. Potential buyers will look at these rooms and calculate how much money it will cost them to fix the property if they end up buying it, and will want to discount that value from whatever price they want to offer for the hotel.
You could consider investing in repair work to correct whatever the major issue might be, which would remove the scenario of a buyer trying to reduce their asking price. But such work could require much more time and money than you are able to spend. If that’s the case, the good news is that there are still methods of selling your hotel "as is" in its current condition.
Deciding on how you want to sell your hotel
When selling a hotel, you will typically need to choose between doing so via an estate agent, via an auction, via a fast buyer, or on your own. There are specific advantages to each of the four methods, and certain disadvantages to a few choices based on their time and speed.
To help you make a decision on how to sell, write a budget that details the amount of money you’d ideally like to make from the sale, the amount of time you’re willing to wait to find a buy, and relevant factors. Compare these against the benefits and drawbacks of the approaches listed below, and this should hopefully guide you toward what best suits your wants and needs.
Selling your hotel via an estate agent
An estate agent will be responsible for a large amount of work in selling your hotel. This includes crafting a listing that features photographs of the inside and outside of the property along with a description of it, advertising that listing in their office, local newspapers and online, organising and hosting viewings for potential buyers to tour the hotel, and fielding any offers. That can be great for reducing your stress with selling, as there’s very little work for you to do.
It can be a very slow process for selling, and you might be waiting more than a full year before you get a genuine offer. Remember also that a potential buyer can abandon the purchase any time before the exchange of contracts, and there’s nothing that you can do enforce the sale. Instead, you’ll be back at the start in trying to find a buyer, adding more time to the process.
If an estate agent manages to sell your hotel, you will also have to pay them commission. This fee is deducted from the sale proceeds immediately.
Note also that some estate agents might not have any experience with selling hotels, and they might only know how to find buyers for conventional houses or flats. If that’s the scenario, the estate agent could struggle to generate any interest in your hotel, further delaying a sale.
Selling your hotel via an auction
The auctioneer also handles much of the work in selling a property, because they’ll prepare and advertise the listing, and host the auction, along with overseeing the completion of a successful sale. This is a great advantage for those owners who don’t want to do much work when selling, but there are also several disadvantages of selling a hotel this way that you should know about.
It’s always uncertain when selling a property through an auction, because you don’t know what the final sale price will be. Your hotel might not even get any bids, in which case it is deemed to have not sold, and you’ll have to start again with finding a buyer, creating more delays.
The typical timeline when selling through an auction is at least a few months. There’s a delay of several weeks between the date on which you enter your hotel for sale and the date on which the auction takes place. If your hotel sells, the buyer will then have an average of 28 days to complete all of their mandatory legal paperwork and other steps to finalise their purchase. You might be able to negotiate a shorter deadline, so it’s always checking with auctioneers on this.
You’ll be asked to select a reserve price, which is the lowest value at which you agree to sell your hotel. Ensure that you have selected a price that works for you.
Some auctioneers might also not have successfully sold a hotel before, and you can ask individual companies about their record with finding buyers for such properties. If they have never managed to auction off a hotel, it’s a strong signal that they will not know how to advertise your property, and as a result they might find it difficult to attract any interest from buyers.
Selling your hotel via a fast buyer
LDN Properties and other quick buyers are known as such because they often have the funds ready to make immediate purchases of hotels and other properties, without first having to wait for many weeks or months to win approval for a mortgage to cover the price of the sale. This cuts the average timeline of selling a property to just a handful of short weeks, and that includes the time it would take to exchange contracts and pay an owner their full proceeds.
Fast buyers can make offers to buy almost any type of property, no matter its age, condition, shape, size or type. As an example, the lengthy and varied list of purchases considered by LDN Properties since launching in 2003 includes flats with cladding, houses with subsidence, homes located underneath noisy airport flight paths or busy railway stations, properties with infestations of Japanese knotweed, homes with dry rot, flats located in high risk flood zones, vandalised houses, plots of land, and more.
For this reason, fast buyers can also be a good choice when selling a more speciality property like a hotel, particularly if it needs repairs that you are unable to afford. That’s because these companies have extensive history with buying "as is" properties like hotels in need of repair.
Selling your hotel on your own
This can be a very time-consuming way to sell your hotel, and you could be waiting for more than an entire year before you get a serious offer from a buyer.
It is also a highly stressful option, because you will have to spend a lot of effort, money and time in advertising your property, organising viewings, and fielding offers. It’s only advised for people who have experience with selling hotels, or that have a friend or family member with such knowledge who might be willing to help you for free with trying to find a buyer.
One benefit of selling this way is that you won’t have to pay an estate agent, auctioneer or any other third party any fees. But you can get this same result with zero stress by instead selling your hotel to a trustworthy no-fee fast property buyer.
Key queries and answers about selling a hotel
Property owners looking to sell fast often have questions they need answering, ranging from the amount of repairs they should do before selling through to selling in a bad state. Read some of the main questions we’re asked about selling a hotel:
Your top questions when selling a hotel
For tax purposes, the government defines a hotel as – Commercial establishments providing lodging (furnished sleeping accommodation) and possibly meals and other facilities such as laundry services, communal TV or rest rooms and phone services for guests and visitors. However, a property does not need to have all of these features to qualify as a hotel.
Yes, the law requires that you fully disclose any physical problems – like subsidence, dry rot and other structural damage – to potential buyers when trying to sell your hotel. If someone ultimately decides to purchase your property and then later discovers that you hid a particular problem from them during the selling process, they can then pursue a lawsuit against you.
It varies depending on the selling method that you choose, with the fastest option being the use of a quick home buyer like LDN Properties, because these take just a handful of weeks, and that includes exchanging contracts. Auctions will take many months to complete all of the mandatory steps, and selling on your own or via an estate agent might take over a full year.
This is also a variable factor, because you will not pay any commission or other fees when selling your hotel on your own or to a quick property buyer like ourselves. However, estate agents and auctioneers will make you pay commission often based as a percentage of the sale price.
As the current owner of the hotel, you are likely liable for paying Value Added Tax that applies to the money you make providing rooms to paying guests, and Income Tax will also likely be charged on this revenue. When you sell the hotel, you might be liable for paying Capital Gains Tax on the profit that you make, although this will depend on the amount of that gain. Be sure to obtain professional tax advice.
An independent entity called The Property Ombudsman (TPO) issues policies that protect property owners against fraud in the quick buying industry, and all true TPO members must follow those rules, which should give you extra peace of mind. Be wary of selling your hotel to a company that refuses to join TPO or claims to be a TPO member but cannot prove it.
Yes, it’s a fairly simple and free process to find out whether a quick property buyer is truly registered with TPO. Visit the organisation’s website and click on the Find a Member tab on the left side of the welcome screen, then when prompted type in the name of a specific company. If they are registered with TPO, you’ll then be shown their membership details.
