The market is at the heart of whether your hotel investment is successful. Because it is so crucial, hotel owners do their own personal investigation into the market. In addition, they often engage consultants to do market studies. Lenders also have the market investigated as part of the appraisal.
Some owners get into the market assessment personally in depth. Other owners rely almost exclusively on studying historical information on the hotel, findings from brokers and independent third-party experts, and a property tour. A worksheet (template) for you to do your own market assessment is available at Fortuna’s Table.
Market analysis gathers information about neighborhood and citywide market dynamics, particularly demand and supply in the hotel sector. The analysis you do personally is an evaluation of your hotel’s potential position in that market. It helps you better understand your prospective business and its risks and opportunities. It clarifies what makes you different from the competition and helps you plan how to set up your hotel for success.
When you are doing due diligence to purchase an existing hotel, you should have access to extensive historical data. Highlights and key indicators including KPIs and financials should be in the broker’s package while you are evaluating possible hotel acquisitions. Once you are under contract, you will have a due diligence period during which you can access and study in-depth information through the broker or seller.
When you evaluate a hotel project, you get your own feet on the ground, talk to businesspeople in the area, visit local government offices, check-out the attractions and walk through the area hotels. You will also study information available through the broker or from property management. As you explore the opportunity, in addition to information commonly reviewed you may ask for other reports to address particular concerns or questions.