How are hotels valued?

Hotels are valued on performance, not just square footage. The key metrics are ADR (average daily rate, the average price a room sells for), RevPAR (revenue per available room — ADR multiplied by occupancy), and the cap rate (net operating income divided by price). Buyers build a value from NOI and a market cap rate, then compare RevPAR against similar hotels.

How much does it cost to buy a hotel or boutique inn?

Prices vary widely because most hotel deals include the real estate. A small independent inn or motel can start in the hundreds of thousands, while a larger or flagged property runs into the millions. Price depends on room count, location, revenue (RevPAR), condition, and whether a brand flag is attached.

What is a PIP (Property Improvement Plan)?

A Property Improvement Plan is a renovation plan a hotel brand often requires when a flagged property changes ownership, to bring it up to current brand standards. A PIP can cost six or seven figures, so buyers should get the estimate before agreeing on a purchase price.

Can you get an SBA loan to buy a hotel?

Yes. Because hotel purchases include real estate, they commonly use SBA 504 loans (designed for owner-occupied commercial real estate), often combined with SBA 7(a), as well as conventional commercial or hospitality-specific lenders. Down payments are typically larger than a restaurant business acquisition, and lenders weigh the property's cash flow and your operating experience.

What's the difference between a franchised and an independent hotel?

A franchised (flagged) hotel carries a brand like Marriott or Hilton, giving it instant recognition and a reservation pipeline but requiring franchise fees and brand-mandated standards. An independent or boutique hotel has no brand affiliation — full creative control and no franchise fees, but you build demand and distribution yourself.

How to Buy a Hotel or Boutique Inn

Buying a hotel or boutique inn is one of the more ambitious moves in hospitality — you're acquiring real estate and an operating business at the same time, and it's valued on how well it fills rooms. Whether you're eyeing a small independent inn, a roadside motel, or a franchised property, this guide covers how hotels are priced, what to inspect, how to finance the purchase, and how the deal comes together.

A Hotel Is a Real-Estate-and-Business Hybrid

Unlike a restaurant lease, most hotel deals include the building and land. That means you're underwriting two things at once: the value of the real estate and the strength of the operating business (room revenue, occupancy, and profit). It also means bigger price tags, different lenders, and longer timelines than a typical restaurant sale.

The Main Types of Hotels for Sale

Independent / boutique — no brand affiliation. Maximum creative control and no franchise fees, but you build demand and distribution yourself.
Franchised (flagged) — carries a brand (Marriott, Hilton, IHG, etc.). Instant recognition and a reservation pipeline, but franchise fees and brand-mandated standards.
Motel — typically exterior-corridor, drive-up, lower price point. Often a strong owner-operator play.
Bed & breakfast / inn — small, often owner-occupied, high-touch. More lifestyle business than pure investment.

How Hotels Are Valued: ADR, RevPAR & Cap Rate

Hotels are priced on performance metrics, not just square footage. The three you'll hear most:

ADR (Average Daily Rate) — the average price a room sells for per night.
RevPAR (Revenue Per Available Room) — ADR × occupancy. This is the headline number, because it captures both price and how full the hotel runs.
Cap rate — the property's net operating income (NOI) divided by the price. It's how investors compare a hotel's return against other properties; a lower cap rate means a higher price relative to income.

A serious buyer builds the price up from NOI and a market cap rate, then sanity-checks it against RevPAR versus comparable hotels in the same market.

What to Check in Due Diligence

The STR report and financials. Review the hotel's Smith Travel (STR) report and 2–3 years of financials to see how its occupancy, ADR, and RevPAR compare to its competitive set.
The PIP (Property Improvement Plan). For a flagged hotel, the brand often requires a renovation plan when the property changes hands. A PIP can run into six or seven figures — get the estimate before you agree on price.
Franchise agreement. Confirm whether the flag transfers, the remaining term, and the fees. For an independent, evaluate whether adding a flag would help.
Physical condition. Roof, HVAC, elevators, pool, and life-safety systems are expensive surprises. Get a property condition assessment.
Management. Is it owner-operated, or is there a management company and staff staying on? That changes both the price and your day-one workload.

Financing a Hotel Purchase

Because real estate is involved, hotel deals often use SBA 504 loans (built for owner-occupied commercial real estate) or SBA 7(a), frequently combined, as well as conventional commercial or specialized hospitality lenders. Down payments are typically larger than a restaurant business acquisition, and lenders scrutinize the property's cash flow and your operating experience closely. Talk to a lender who does hotels specifically before you make an offer.

The Buying Process

The arc is similar to any business acquisition but longer: define your target, get pre-qualified with a hotel lender, find the property, sign a confidentiality agreement to see the financials, submit a Letter of Intent (LOI), run due diligence (including the STR report and any PIP), and close — assigning the franchise agreement and transferring licenses along the way. Budget more time than a restaurant deal; hotel closings commonly run several months.

Find Hotels for Sale

Browse hotels, motels, and boutique inns for sale on ListingLedge — filter by location and type, and contact owners or brokers directly. Selling a hotel instead? List your property free and reach qualified hospitality buyers.