Buying a Hotel

Name: Acquisition Stars - M&A Attorney Michigan
Address: 26203 Novi Road Suite 200, Novi, MI, 48375, US
Telephone: +1-248-266-2790
Price range: $$$$

Hotel acquisitions are among the most complex small business transactions. You're buying a real estate asset, an operating business, potentially a franchise relationship, multiple vendor contracts, and inheriting a workforce - all in one deal. Brand compliance, liquor licenses, employment obligations, and flag transfer requirements create layers of legal complexity that require experienced M&A counsel.

Typical deal: $1M - $50M+ Structure: Entity Purchase or Asset Purchase (often includes real estate)

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The Hotel Acquisition Landscape

The U.S. hotel industry comprises over 55,000 properties ranging from independent motels to branded full-service resorts. Acquisitions vary from sub-$1M independent properties to institutional-grade branded hotels exceeding $50M. The legal complexity scales with the deal: flagged (branded) hotels involve franchise agreements and brand compliance, while independent properties may be simpler operationally but carry more real estate risk.

Key Legal Considerations

Hotel acquisitions involve industry-specific legal issues that general business attorneys often miss:

Hotel franchise (flag) agreement: transfer approval, property improvement plans (PIPs), and brand standards compliance

Real estate title, survey, and any encumbrances (easements, deed restrictions)

Liquor license transfer (highly regulated, varies by state and municipality)

Employment law: WARN Act compliance, collective bargaining agreements, employee benefit obligations

Management agreement review (if third-party managed)

Furniture, fixtures, and equipment (FF&E) reserve requirements

Due Diligence Checklist: Hotel Acquisition

Before closing on a hotel purchase, verify each of these items:

Review franchise agreement, brand standards, and any pending PIP requirements
Obtain franchisor's preliminary approval and identify transfer conditions
Phase I environmental assessment and property condition report
Review all revenue management and OTA (online travel agency) contracts
Assess liquor license transfer requirements with local authority
Review employment records, benefits, and any pending labor disputes
Analyze trailing 12-month financial performance by department (rooms, F&B, events)

Common Deal Killers

These issues kill more hotel acquisitions than bad economics:

Franchisor mandates a Property Improvement Plan (PIP) costing millions

Liquor license transfer denied or delayed beyond closing timeline

Undisclosed capital expenditure requirements or deferred maintenance

Why Legal Counsel Matters

Hotel deals involve multiple regulatory approvals happening simultaneously: franchise transfer, liquor license, real estate closing, and potentially SBA or CMBS loan requirements. Missing any one of these can delay or kill the deal. Your attorney needs to manage parallel workstreams and anticipate where approvals will bottleneck.

Our Process: Hotel Acquisitions

A structured approach to hotel acquisition counsel

LOI and Franchise Pre-Approval

We review the letter of intent and immediately engage with the hotel franchisor to begin the transfer approval process and identify PIP requirements.

Parallel Due Diligence

Property condition assessment, environmental review, financial analysis, franchise compliance audit, and liquor license transfer initiation - all running simultaneously.

Purchase Agreement Negotiation

We negotiate the purchase agreement with specific hotel provisions: PIP cost allocation, FF&E reserves, advance deposit handling, and guest reservation obligations.

Regulatory Approvals

We manage franchise transfer approval, liquor license transfer, and any other regulatory requirements through to completion.

Closing and Transition

Coordinated closing with seller, franchisor, and lender. Guest reservation transition, employee onboarding, vendor contract assignments, and operational handoff.

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Frequently Asked Questions

Common questions about buying a hotel

Do I need franchisor approval to buy a branded hotel?

Yes. All major hotel brands (Marriott, Hilton, IHG, Wyndham, Choice) require franchise transfer approval. The franchisor will evaluate the buyer's financial capacity, hotel experience, and willingness to comply with brand standards. They may also require a Property Improvement Plan (PIP) as a condition of approval.

What is a Property Improvement Plan (PIP) in a hotel acquisition?

A PIP is a list of renovations and upgrades that the hotel franchisor requires as a condition of approving a new owner. PIPs can range from minor cosmetic updates to multi-million dollar full renovations. Understanding the PIP scope and cost before signing the purchase agreement is critical to deal economics.

How does a liquor license transfer work when buying a hotel?

Liquor license transfers are governed by state and local law and vary significantly by jurisdiction. Some states allow license transfers with the business, while others require a new application. The process can take 30 to 120+ days. Your attorney should begin the transfer process immediately after LOI execution.

What happens to hotel employees when ownership changes?

In an asset purchase, the buyer is not legally required to hire the seller's employees but typically does to maintain operations. The WARN Act may apply if significant layoffs are planned. Any collective bargaining agreements must be carefully reviewed. In an entity purchase, employees generally continue without interruption.

How long does it take to close on a hotel purchase?

Hotel acquisitions typically take 90 to 180 days from signed LOI to closing. The timeline is driven by franchise approval (30 to 60 days), liquor license transfer (30 to 120 days), and financing (45 to 90 days). These workstreams should run in parallel, not sequentially.

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