Rather than simply accepting the Profit and Loss statement from the seller and submitting it to potential buyers for them to analyze, our agents examine the operation carefully for potential upside.
We begin our analysis by looking at the gross income. As hotel and motel brokers, NHMB pays for and obtains a STR (Smith travel Research) report for each property which shows what the competitive properties in the subject market areas are achieving in occupancy and ADR compared to the subject property. We analyze the market share of the subject property to understand how it can be improved. We find ways for a buyer to raise the top line sales which means more annual cash income and a higher value. To increase the top line income we consider how the property is aligned. Is it an independent property which can benefit from a franchise? Or can the implementation of an internet marketing company who can improve the marketing through the OTAs (Online Travel Agencies) and other internet marketing methods improve the gross room income?
NHMB real estate agents never put a listing on the market without going through the Profit and Loss Statement, item by item to calculate what the real profit from operations should be. We then consult with prospective buyers to show them what can be done with the property to make it more profitable, thus increasing the value of the property. We look at all costs, such as labor, franchise fees, credit card discounts, insurance, legal and accounting fees and any other fixed or variable expenses that are above what one would normally see in an operation the size of the subject property. For example, is the total labor at 20% to 25%, as is normal, or is it 30% to 40%? An excessively high payroll could be corrected by a new owner, with our assistance. Reducing that expense increases the bottomline profit and thus increases the return on investment of the property.
Only an agent with the experience of operating a lodging property who has been an owner and had to meet a negative cash flow in the off season can make these corrections and can show a buyer the upside potential in a property.