How to buy a hotel: the process, the numbers and the funding
Buying a hotel is buying a business and a building at once. This guide walks the whole process, from finding the right asset and reading the accounts to the going-concern valuation, the deposit and how the purchase is funded.
To buy a hotel you first agree what you are buying, the trade and the property together, then verify it through the accounts and a going-concern valuation, then fund it. The process runs through sourcing the asset via specialist agents, analysing occupancy, average daily rate and RevPAR, building a business plan, agreeing heads of terms, and completing due diligence on the accounts, licences and condition. Funding usually combines a commercial mortgage against the going-concern value, a deposit of around 30 to 40 percent, a VAT loan where VAT applies, and asset finance for fixtures and equipment. The valuation is the pivot: a hotel is valued on its fair maintainable trade, not just its floor area. We arrange the finance; we do not lend.
At a glance
- What you buyA trading business and its building
- Valued onFair maintainable trade, not floor area
- Key metricsOccupancy, ADR and RevPAR
- Typical depositAround 30 to 40 percent
- Funding stackMortgage, VAT loan, asset finance
- Market depthUK hotel investment 5.0 billion pounds in 2025 (Savills)
Decide what kind of hotel and how you will run it
Before viewing anything, be clear on the model. A limited-service budget hotel, a full-service town-centre hotel, a boutique or a resort each trade differently and are financed differently. Decide whether you will own and operate, own and let to an operator, or buy a leasehold operating business, because that decides which lenders will look at you and how much deposit you need. Your experience is part of the case, so a first hotel is priced and structured more cautiously than your fifth.
The market is deep and active. Savills put UK hotel investment at 5.0 billion pounds for full-year 2025, above the ten-year average, with London drawing 3.0 billion pounds and the regions 2.0 billion pounds, so there is a functioning market of buyers, sellers and lenders to work within. Asset-class detail is at /asset-classes/hotel-finance/, with boutique and aparthotel routes at /asset-classes/boutique-hotel-finance/ and /asset-classes/aparthotel-finance/.
Find the asset and read the trade
Hotels are sold through specialist agents such as Christie & Co, Savills and Colliers, on and off market. Once you have a candidate, the trade is what you are really buying, so read the accounts hard. The three numbers that drive a hotel are occupancy, the average daily rate and RevPAR, which is revenue per available room and combines the two. UK hotel occupancy ran at 76.1 percent year to date in 2025 (STR), with London near 82.5 percent for the full year and regional RevPAR closing at about 79 pounds (HotStats), which gives a benchmark to test a target against.
| Metric | What it tells you |
|---|---|
| Occupancy | How full the hotel runs across the year |
| ADR | The average daily room rate achieved |
| RevPAR | Revenue per available room, occupancy times ADR |
| GOP | Gross operating profit after running costs |
| Seasonality | How trade swings across the year |
Understand the valuation before you offer
A hotel is a trade-related property, valued as a going concern on its fair maintainable trade, the level a competent operator could sustain, capitalised to a value. It is not valued per square foot like an office. This matters before you offer, because the price you agree has to make sense against the fair maintainable trade, not the current owner's actual trade, which may be higher or lower than a reasonably efficient operator would achieve. The full method is at /guides/hotel-valuation-guide/, with the underlying concepts at /guides/going-concern-valuation/ and /guides/fair-maintainable-trade-explained/.
Buyers sometimes reach for quick rules of thumb, such as valuing a hotel at a round multiple of its room rate, and questions like the 5 and 10 rule circulate online. Treat these as pub-quiz trivia, not valuation. A lender will fund against a professional going-concern valuation built on fair maintainable trade, so that is the number your offer and your deposit have to work against.
Agree terms and complete due diligence
- Agree heads of terms with the seller, setting price, what is included and the structure.
- Decide asset purchase versus share purchase, which changes tax and liability, and take advice.
- Instruct solicitors and begin legal due diligence on title, licences and any tenancies.
- Verify the trade: audited or certified accounts, VAT returns, booking data and forward bookings.
- Commission the going-concern valuation and a building survey, and confirm the funding.
Tax is a live part of the structure. Stamp duty land tax applies to the property, VAT may apply to the purchase unless it qualifies as a transfer of a going concern, and the share-versus-asset decision changes both. Take proper accountancy and legal advice early, because it affects how much cash the deal needs and how the finance is structured.
Fund the purchase
A hotel purchase is usually funded as a stack rather than a single loan. The core is a commercial mortgage against the going-concern value, with a deposit commonly around 30 to 40 percent because part of the value is goodwill. Around it sit a VAT loan to cover the VAT where it is chargeable, asset finance for the fixtures, furniture and equipment, and sometimes an acquisition or working-capital facility for the opening period.
- Commercial mortgage against the going-concern value at /services/commercial-mortgages/
- VAT loan for the VAT on a chargeable purchase at /services/vat-loans/
- Asset finance for fixtures, furniture and equipment at /services/asset-finance/
- Acquisition finance for a portfolio or a complex structure at /services/acquisition-finance/
- A short bridging facility where a fast or unmortgageable purchase needs speed, at /guides/bridging-loans-for-hospitality/
We build and place that whole stack. We read the trade, size the mortgage against the going-concern valuation, and structure the supporting facilities so your own cash goes as far as it can. We are an arranger, not a lender, and Matt Lenzie takes every case to market personally.
How to buy a hotel: the process, the numbers and the funding: common questions
Is buying a hotel a good investment?
It can be, but it is an operating business as much as a property, so the return depends on the trade as well as the asset. The UK market is deep, with Savills putting hotel investment at 5.0 billion pounds in 2025, and occupancy strong at 76.1 percent year to date (STR). The risk is operational: a hotel bought well and run well performs, one bought on an optimistic trade does not.
What is the 5 and 10 rule in hotels?
It is an informal rule of thumb people cite as a quick screen, not a professional valuation method. A hotel is valued as a going concern on its fair maintainable trade, capitalised to a value, and a lender funds against that. Treat rules of thumb as rough conversation, not the basis for an offer or a loan. The proper method is at /guides/hotel-valuation-guide/.
How much money do I need to buy a hotel?
Plan for a deposit of around 30 to 40 percent of the going-concern value, plus stamp duty, VAT where it applies, legal and valuation fees, and working capital for the opening period. A VAT loan and asset finance can reduce the cash needed on completion, but a hotel is a significant equity commitment and lenders expect real skin in the game.
How much deposit do you need to buy a hotel?
Usually around 30 to 40 percent of the value, higher than a simple let commercial investment because part of a hotel's value is goodwill that lenders discount. A strong set of accounts, relevant experience or additional security can bring it down, while a first-time operator or a weaker trade sits at the higher end. Figures vary by lender and trading history.
Can I buy a hotel with no experience?
Yes, but it is harder and priced more cautiously. Lenders favour operators with a track record, so a first-time buyer usually needs a larger deposit, a credible business plan and sometimes an experienced management company or general manager in place. Buying a well-traded, straightforward asset is a more financeable first step than a turnaround.
Should I buy the hotel property or the company that owns it?
That is the asset-versus-share decision, and it changes tax, liability and how the finance is structured. A share purchase can carry historic liabilities but may save stamp duty; an asset purchase is cleaner but taxed differently. It is a question for your accountant and solicitor, and it needs deciding early because it affects the funding.
How long does it take to buy a hotel?
Typically three to six months from agreed terms to completion, depending on due diligence, the valuation and the finance. A clean freehold with good accounts moves faster; a leasehold, a licensing issue or a complex structure takes longer. Arranging the finance in parallel with the legal work, rather than after it, is the main way to keep the timetable tight.
Ready to take a deal to market?
Send us the scheme and the numbers and we will come back with a view on fundability and likely terms within one working day.