Preparing for the Sale of your Hotel business: A Guide for Family Offices

Hotel transactions are experiencing significant growth, drawing interest from a wide array of investors worldwide, including private equity firms and high-net-worth individuals. Recent research by Savills highlights that the UK achieved £3.08 billion in hotel transaction value during the first half of 2024 - a 35% increase compared to the previous year^[1], with a total in excess of €21.9 billion invested in European Hotels (including UK) in 2024. This marks a 47.6% increase compared to the previous year and a five-year high^[2].

While our previous article Investing in Hotels: A Guide for Family Offices focused on entering the hotel market, this article is designed for those considering exiting. If you're contemplating the sale of your hotel assets, it is crucial to prepare thoroughly to ensure you start negotiations on the right foot and maximise the value of your business. Here, we offer practical tips to help you prepare for a successful sale.

The transaction structure

One of the first steps to consider when a potential sale is on the cards will be working with legal, financial and tax advisors to decide how the transaction is best structured to meet the goals of the parties - a key decision being whether it will be a share sale or a business sale. A share sale involves the sale of shares in the company that owns the hotel assets, and all of the assets and liabilities of that company remain with it. Alternatively, on a business sale, only the assets and liabilities identified in the legal documentation will be transferred. Business sales are typically more complicated than share sales, as assets have to be separately identified and transferred, and the consent of third parties may be required. We will take a deeper dive into the sale process in our upcoming article ‘Selling your Hotel business: A Guide for Family Offices’.

Pre-sale tax planning: Key Considerations for Sellers

Pre-sale tax and estate planning should be part of the conversation about the business sale at an early stage. Considerations such as personal and company tax mitigation, asset protection and succession can all have a part to play in early discussions about a sale. Major liquidity events can be a good opportunity for families and the family offices that serve them to review these matters.

This complex area can raise a number of issues for sellers depending on their personal tax arrangements and shareholdings and advice should be sought in good time. Key things to consider on all transactions include corporation tax and managing employment income tax issues on considerations. However, family offices may need additional advice on the following issues.

Tax relief for individual and trustee sellers

In some cases, significant tax savings might be available. Relevant reliefs to keep in mind include:

• Capital gains tax business asset disposal relief (BADR): Where a transaction is subject to UK capital gains tax, for example where UK resident individuals (or, in some circumstances, trustees) dispose of assets or shares in a company standing at a profit, it may be possible to benefit from BADR. Broadly, BADR can reduce the tax rate from 24% to 14% for qualifying gains up to a lifetime limit of £1m. It would be important to assess what assets might qualify and check that all ownership time requirements have been met. Shares, for example, must have been held for 2 years to qualify.
• Inheritance tax (IHT) business property relief (BPR): This relief is undergoing significant changes and will be more limited from 6 April 2026. Broadly, it  is expected that from this date, the tax on the first £1m of value in qualifying assets held by an individual would be reduced by 100% and the balance of the qualifying value would be reduced to 50%. Planning can be undertaken to maximise to availability of the relief (particularly if that is completed before 6 April 2026). This relief is also available for trustees but there are more complexities to consider. For more on this topic see What do the proposed changes to business property relief mean for Investors and Entrepreneurs and their businesses?

Making sure that the business is structured in a way that can help maximise reliefs like this is something we recommend taking advice on early on.  

Estate planning

As noted above, a major liquidity event is also a good opportunity to take stock and ensure the ultimate beneficial owners have appropriate Wills and estate plans in place. Reviewing these arrangements often dove-tails nicely with wider discussions about family governance and plans for the future, which can be crucial on a major asset sale. For example, thinking about how to invest sale proceeds can be an excellent path to engage with the next generation in a structured way. 

Preparing a Hotel for Sale: Getting your company sale ready

So what do you actually need to do to get all your ducks in a row? Below are some key areas you will need to consider:

Financial Information

Ensure financial records are up to date and accessible and identify any contingent or off balance sheet liabilities that may affect the value of the company.  Contingent liabilities may include deferred maintenance or capital expenditure requirements, which are particularly pertinent in the hotel industry. A prospective buyer will carry out financial due diligence on the company and base its valuation on the financial information you provide. If the information is clear, accurate and readily accessible, it is less likely that unexpected items will arise later in the sale process that could lead to price chipping by the buyer.

Corporate information & title to shares

Ensure Companies House filings are up to date and the statutory registers are accurate and complete, including the PSC register. Find original share certificates and check that any share buy-backs or reductions of capital were carried out correctly. Resolving defective share buy-backs or reductions of capital can be complex and time consuming. Rectifying these in advance of a sale process will put you in a better position when negotiating relevant warranties and risk apportionment. Also, ensure that any management agreements or joint venture structures are clearly documented, as these are common in the hotel sector and will be scrutinised are part of legal due diligence.

Reviewing Hotel Commercial Contracts Before a Sale

Carry out a general review of the commercial agreements in place and consider:

• whether the standard terms and conditions need to be updated;
• formalising any unwritten arrangements with important business partners, including vendors, service providers, and event planners;
• whether any contain change of control clauses or other provisions which may impact on the sale process - these usually require the seller to seek consent of the counter party before the sale can proceed or risk breach of contract. Whether such consent is sought in practice and the timing of such will depend upon how important the relevant contract is to the hotel’s operations and the respective negotiating positions of the parties;
• whether any contracts may be terminated on short notice or contain any onerous “non-market” terms (such as unlimited liability). A buyer will consider such contracts as more risky, and therefore, a seller may consider amending the terms of such agreements before the sale, if there is an opportunity to do so; and
• whether any important contracts are close to expiry. If not agreed prior to the sale process beginning, a buyer will expect to see the seller taking proactive steps to arrange for extension of these contracts and may make such extension a condition to completion of the sale.

Exit Ready Hotel Agreements

Consider the terms of your hotel management and franchise agreements as these may have an impact on the marketability of a hotel. Almost all such agreements will include restrictions on assignments or dealings as operators will want prior approval to ensure that they are satisfied with the identity of the incoming party. Some agreements include additional restrictions on financing or even a right in favour of an operator to terminate its engagement as a result of a change of hands. Negotiating terms that are favourable to a potential sale, such as flexible assignment clauses and pre-approved financing arrangements, can make your hotel more attractive to a broader range of buyers and can help to secure a premium on a sale.

Employees and pensions

For most companies, their most important assets are their employees. In preparing for a sale, a seller should:

• ensure all key employees have formal employment agreements in place; 
• get employee contracts, records and any employee handbook in order;
• consider the immigration status of employees and ensure that the expiry date for those employed under a visa, work permit or a certificate of sponsorship has not passed; and
• get records of the company’s pension schemes (whether defined benefit, auto enrolment or otherwise) in order.

You should also keep an eye on the upcoming reforms to employment legislation in the UK, with the Employment Rights Bill expected to come into force in 2026, which will have a significant impact on the hospitality sector. For more on this topic see our Employment Law Briefing: Labour’s Employment Rights Bill.

Assets and properties

Identify any assets that may not be attractive to a buyer, such as an underperforming or non-core business, and consider whether a group reorganisation is required to make the company more marketable. Ensure all title deeds and leases are available for any properties and any documents showing title to other key assets are retained. Additionally, you may want to ensure that any unique or heritage aspects of the hotel properties are properly valued and that their potential is communicated to prospective buyers.

Intellectual property

Ensure all trademarks, patents and domain names are owned by the company, properly filed and up to date. This includes any branding associated with the hotel, such as logos, which can be significant value drivers in the hospitality sector. Sometimes founders hold intellectual property used by the company in their own names and this will usually be transferred to the company prior to a sale, or licensed on terms satisfactory to the buyer and the founders.

Litigation and compliance

Where a sale is structured as a share sale rather than a business sale, a buyer will investigate any litigation or compliance issues which it may inherit at completion. Therefore, a seller should try to minimise such risks by:

• negotiating settlements of any outstanding litigation, including any disputes with guests, vendors, or employees; and
• ensuring compliance with data protection, GDPR, health & safety requirements, anti-bribery laws and other relevant laws and regulations, including industry-specific regulations such as those related to food and beverage services, hospitality standards, and employment practices.

Records of any disputes which may give rise to future litigation and any correspondence with regulators regarding compliance issues should be retained.

Top Tips for Preparing your Hotel Business for Sale

It’s never too early to start thinking about preparing your hotel business for sale. We recommend that you plan far in advance of the sale and consider whether to undertake any sell-side due diligence to flush out, and get ahead of, any issues ahead of the sale process. You should also consider family governance and tax and estate planning as part of this early on, if possible. This will also help you to plan ahead and ensure that the sale is structured in a manner that allows tax-planning arrangements you have in place. Finally, it is also vital to ensure you have a good team of lawyers and other sell-side professionals (such as corporate finance advisors) appointed and get them working on the project, the earlier the better! So please do get in touch with our team at Charles Russell Speechlys for pre-sale guidance and support.