Hotel Sales, Mergers, and Acquisitions

A hotel’s brand is one of its most valuable assets, and a poorly managed transition can dilute brand equity, lead to customer loss or impact guest experiences. Buyers should start by identifying all brand-related assets that require formal transfer (particularly in an asset purchase), including:

• Trademarks & Domain Names – Ensure that the hotel’s name, logo, website, and social media accounts are formally transferred as part of the transaction.
• Franchise or Licensing Agreements – If the hotel operates under a well-known brand or as part of a franchise, check whether the agreement is transferable or requires renegotiation. Some brands require reapplication for franchise approval under new ownership.
• Guest Loyalty & Membership Schemes – Determine whether loyalty programme members will retain their benefits and if the buyer must honour any existing obligations.
• Supplier & Marketing Contracts – Many hotels work with preferred suppliers and marketing agencies whose contracts may be tied to the previous owner. Buyers should review these agreements to ensure continuity in branding efforts.

To protect brand value post-acquisition, a transition period with seller involvement can be negotiated. This allows the buyer to benefit from the seller’s expertise and ensures a smooth handover.

Pre-booked stays, event reservations, and customer deposits do not automatically transfer in an asset sale and must be accounted for in the transaction. If mishandled, this can result in guest dissatisfaction, refund disputes, and reputational damage.

• Asset vs. Share Sale Considerations – In an asset sale, existing bookings and deposits are not automatically included and must be contractually assigned. In a share sale, bookings typically remain with the company, leading to minimal disruption.
• Escrow or Retention Mechanism – Buyers can negotiate a retention clause, where part of the purchase price is withheld for a period to cover any refund claims or cancellations.
• Clear Contractual Warranties – Sellers should provide warranties that all disclosed bookings are accurate and that deposits have been properly accounted for in financial statements.

A well-structured handover plan should include customer communication strategies to reassure guests and avoid revenue losses.

Non-compete clauses are a key area of negotiation in hotel sales, especially if the seller owns multiple hotels in the same region. Without restrictions, the seller could open a competing hotel within close proximity, attracting past customers and undercutting the buyer’s market position.

What Can Be Negotiated?

• Non-Compete Agreements – Buyers can request a contractual restriction preventing the seller from operating a competing hotel within a defined geographical area and time frame (e.g., 5 years within a 50-mile radius).
• Exemptions for Existing Holdings – If the seller already owns multiple hotels, they may negotiate that the restriction only applies to new hotel ventures, rather than their existing portfolio.
• Seller Transition Period – If the seller is staying on as a consultant post-sale, buyers may negotiate restrictions on using trade secrets, guest data, and supplier relationships for their other businesses.

A balance must be struck between protecting the buyer’s interests and allowing the seller commercial freedom. Legal enforceability should be carefully assessed to ensure restrictions are reasonable and proportionate.

Hotels rely heavily on skilled management, chefs, and front-of-house teams, and a sudden staff exodus can damage service quality and customer satisfaction. Under TUPE, employees automatically transfer to the new owner under an asset sale, but retention challenges remain.

Strategies for Retaining Key Staff:

• Incentivisation Packages – Buyers can offer performance-based retention bonuses or equity options to key staff, ensuring they stay post-acquisition.
• Cultural Integration Plans – Employees are more likely to remain if they are reassured about the company culture, management style, and job security under the new ownership.
• TUPE Consultation Compliance – Buyers should conduct clear and open discussions with employees regarding their rights and obligations under TUPE to avoid uncertainty.
• Non-Solicitation Clauses with Seller – Sellers can be restricted from hiring back employees within a set period post-sale to prevent staff poaching.

Retention risks should be addressed well before completion, and tailored strategies should be included in the transaction plan.

If a hotel operates under a franchise agreement (e.g., Hilton, Marriott, IHG, or Accor brands), the transaction is not just between the buyer and seller—the franchisor must also approve the deal.

• Franchisor Consent is Often Required – Most agreements contain change-of-ownership clauses, meaning the buyer must be vetted and approved by the franchisor.
• Franchise Fees & Transfer Costs – Some franchisors charge a transfer or rebranding fee, which should be factored into the purchase price.
• Rebranding Obligations – If the buyer does not wish to continue with the franchise, there may be exit penalties and contractual requirements to rebrand the hotel and remove all franchise branding.
• Performance Guarantees – Some franchise agreements require new owners to meet specific performance criteria, such as minimum occupancy rates or investment in renovations.

Buyers should carefully review the franchise documentation to ensure they fully understand the post-acquisition obligations.

Hotels operate with multiple financial obligations, some of which may not be visible at first glance. A poorly managed acquisition could leave the buyer exposed to unexpected debts, supplier disputes, or underreported liabilities.

• Unpaid VAT & Business Rates – Outstanding tax obligations can become the buyer’s responsibility if not addressed in the contract.
• Deferred Maintenance Costs – A hotel’s financial health may look strong on paper, but buyers should assess hidden capital expenditure liabilities for essential refurbishments or structural repairs.
• Supplier Contract Obligations – Some supplier contracts contain long-term commitments that may not align with the buyer’s strategy (e.g., linen services, food suppliers, laundry providers).
• Outstanding Litigation or Claims – Buyers should check for any pending legal disputes, including customer claims, staff grievances, or regulatory penalties.

A detailed financial audit and contract review should be conducted before finalising the deal, with appropriate warranties, indemnities and price adjustments negotiated where needed.