Projections & returns

Financial due diligence is crucial because ultimately, you want to make money with your hotel. Big picture, you want a hotel to make you money in two ways:

Cash flow from operating the hotel: the profitable net of revenues less expenses

Capital gain from selling the hotel: the profit you receive when the hotel is sold, mortgages and other liabilities are satisfied, investors are paid and the remainder is yours

Due diligence about cash flow from operations includes studying market demand and supply so you understand the risks and opportunities with future revenue. Due diligence also includes studying historic and projected expenses so you can evaluate your prospects for profit.

You also do due diligence about the project’s value currently and in the future to evaluate your prospects of making capital gains.