Hotels and hospitality
Hotels, inns, pubs with rooms, guest houses, holiday parks and restaurants, sold as going concerns with the trading record, the licences and the leases on the record, or as buildings for a new use.
What goes on the record
Three years of accounts, occupancy and average room rate by month, the premises licence, the food hygiene rating, the staff establishment, the management or franchise agreement where there is one, the fire risk assessment and the building's compliance certificates, released to registered buyers under a confidentiality undertaking. The reservation, the deposit and the auction rules are the same as for any Homebinding sale.
Running it after you buy
A hotel on Homebinding can take its own bookings direct through the record with the calendar connected to the booking sites, the same way a holiday let does, and book its cleaning, linen and maintenance through Homebinding Approved.
Buying a hotel, guest house or bed and breakfast as a going concern
A hotel is two things at once: a building, with a roof and a boiler and a car park, and a business, with a booking diary, a payroll and a reputation. When you buy one you buy both, and the price reflects the trade rather than the bricks alone. That is why a hotel sale looks so different from a house sale even when the building would make a perfectly good house.
The same logic runs down the scale. A forty bedroom market town hotel, a twelve room seaside guest house and a three room bed and breakfast all sell accommodation by the night with a service attached. What changes is the weight of the regulation, the share of the price that is goodwill rather than property, and how much of the profit is really the owner's own unpaid labour. This is not advice, and any purchase needs a solicitor and an accountant who have seen the actual accounts.
How a trading hotel is valued
Valuers work from the accounts, not from comparable house prices. The starting point is three years of profit and loss accounts, supported by VAT returns and, where the seller will give them, booking system reports showing occupancy, average room rate and revenue per available room. From that the valuer builds the adjusted net profit, sometimes called fair maintainable operating profit: the profit a reasonably efficient operator could expect, which is not the same as the profit the current owner declares.
Getting there means adding back what belongs to the seller rather than the business, and deducting what the seller has left out. Owner's drawings, family wages that do not reflect real work, one off legal costs, depreciation and finance costs come back. A market rate for a manager the buyer must employ, a realistic repairs allowance and proper insurance come off. That figure is capitalised, which in plain terms means multiplied by a factor reflecting how secure the income is. Steady trade and a business that runs without its owner attract a higher multiple; lumpy accounts and one person doing every job attract a lower one.
The whole is then split. Bricks and mortar is the building. Goodwill is what is paid for the trade, the name, the repeat guests and the reviews. Fixtures, fittings and equipment covers beds, linen, kitchen plant and the rest of the operating chattels, listed in an agreed schedule. Stock is counted and paid for separately at completion. The split matters because lenders, tax advisers and insurers treat the three parts differently. Where trade is weak and the site would make flats or houses, alternative use value can exceed going concern value, which is a planning question as much as a valuation one.
Use classes and what they allow
In England, hotels, boarding houses and guest houses sit in class C1 of the Town and Country Planning (Use Classes) Order 1987, provided no significant element of care is given. Class C3 covers dwellinghouses. The line between them is not always obvious at the small end. A bed and breakfast run from a family home, where the owners live there and let a small number of rooms, may in practice remain a residential use because the letting is incidental to the use as a home. As the number of rooms and the intensity of the trade grow, the balance tips and a material change of use can occur.
Some accommodation uses fall outside the classes altogether and are treated as sui generis, a use in a class of its own, so any change to or from them needs permission on its merits. Hostels are the familiar example. Because these boundaries turn on fact and degree, and because Scotland, Wales and Northern Ireland run their own use class orders, ask the local planning authority in writing before committing, or apply for a certificate of lawfulness confirming the existing use is what the seller says it is.
To turn a hotel into flats, or a house into a hotel, assume a full application under the Town and Country Planning Act 1990, and check whether the building is listed, in which case listed building consent under the Planning (Listed Buildings and Conservation Areas) Act 1990 is needed as well.
The regulatory floor
Alcohol and late night refreshment
If the hotel sells alcohol, provides regulated entertainment or serves hot food late at night, it needs a premises licence from the council as licensing authority under the Licensing Act 2003 in England and Wales. The licence attaches to the premises and is transferable, so a buyer applies to transfer it on completion and to change the designated premises supervisor. Someone at the business needs a personal licence to authorise sales. Scotland and Northern Ireland run separate regimes. Read the existing licence, its conditions and its hours before exchange: conditions imposed after a residents' complaint cut straight into the trade.
Food
Any premises serving food, including a bed and breakfast doing nothing more than a cooked breakfast, must register as a food business with the local authority before trading. Registration is free. A food safety management system based on hazard analysis principles is expected, staff need appropriate training, and the premises is inspected and given a food hygiene rating that guests read.
Fire
Sleeping accommodation is the highest risk category in fire safety terms and the Regulatory Reform (Fire Safety) Order 2005 applies in full. The responsible person must carry out and review a suitable and sufficient fire risk assessment, maintain detection and alarm systems, emergency lighting, escape routes and signage, and train staff. The fire and rescue authority enforces, and can serve enforcement or prohibition notices and prosecute. A buyer should read the existing assessment, ask when it was last reviewed and by whom, and treat recommended works as a cost of purchase.
Everything else
Employer's and public liability insurance, health and safety duties, legionella control in water systems, gas and electrical certification, accessibility for disabled guests, music licensing and data protection for guest records all sit alongside the headline licences.
Rates, VAT and TUPE
A hotel or guest house available for letting for enough of the year is assessed for business rates rather than council tax, on a rateable value set by the Valuation Office Agency in England and Wales, the Scottish Assessors in Scotland and Land and Property Services in Northern Ireland. Smaller businesses may qualify for small business rate relief where the rateable value falls below the threshold set by government and the occupier holds only one property, with relief tapering above that threshold and separate rules where a second property is held. Thresholds are reset periodically, so check the current position with the council rather than trusting a figure in a sales particular.
Supplies of hotel and holiday accommodation are standard rated for VAT, with a reduced value rule for long continuous stays, which makes registration close to inevitable for all but the smallest bed and breakfast. The sale itself needs advice: a trading business may transfer as a going concern outside the scope of VAT if the conditions are met, and the treatment of the property depends on whether the seller has opted to tax.
Where staff come with the business, the Transfer of Undertakings (Protection of Employment) Regulations 2006 will usually apply. Employees transfer automatically on their existing terms with continuity of service intact, and dismissals connected to the transfer are unfair unless there is an economic, technical or organisational reason entailing changes in the workforce. Both sides must inform, and consult where measures are envisaged, and the seller must give employee liability information in advance.
Freehold, leasehold, and splitting operator from property
Hotels sell freehold, leasehold and as businesses alone. A freehold purchase gives you property and trade together, borrows most easily against the bricks, and keeps any future development value. A leasehold purchase costs less at the outset but buys a wasting asset: goodwill and fittings, subject to rent and repairing obligations. On a leasehold deal the unexpired term, the rent review basis, the repairing liability, the alienation clause governing whether you can sell on, and whether the tenancy has security of tenure all bear directly on what you are buying.
Larger deals separate the two. A property company holds the freehold and grants a lease or a management agreement to an operating company that runs the hotel, which lets investors hold the real estate for income and specialists run the trade. It underlies most branded arrangements, by franchise, management contract or lease, and it explains why hotels so often change hands with building and business in different hands. Establish which you are acquiring before signing heads of terms.
Selling a stay and selling the business
Every hotel, guest house and bed and breakfast on Homebinding gets its own page, with its rooms, facilities, photographs and a live calendar showing what is free and what is taken. Guests book by the night directly with the owner. The stays directory lists every property that takes bookings, by place, by type and by what it offers, so a visitor looking for a room in a market town finds the independent guest house alongside everything else rather than behind paid placement.
There is no commission on bookings. Homebinding charges a single set annual fee and takes nothing per night and nothing per booking, so the rate a guest sees is the rate the owner set. Hotels and guest houses for sale as going concerns sit in the same place as everything else on the market, with the trading position described by the seller, the licences listed and the property set out in full.
This is not advice. Sources: Ministry of Housing, Communities and Local Government and the Planning Portal on use classes and change of use; legislation.gov.uk for the Licensing Act 2003, the Regulatory Reform (Fire Safety) Order 2005, the Town and Country Planning (Use Classes) Order 1987 and the Transfer of Undertakings (Protection of Employment) Regulations 2006; the Food Standards Agency on food business registration and hygiene ratings; the Health and Safety Executive on fire, gas, electrical and legionella duties; the Home Office and licensing authorities on premises and personal licences; HM Revenue and Customs on VAT on accommodation and transfers of a going concern; the Valuation Office Agency, the Scottish Assessors and Land and Property Services on rateable values, with small business rate relief administered by billing authorities; and the Royal Institution of Chartered Surveyors on the valuation of trading property.
