With its vast tourist industry, Spain offers plenty of opportunities for hotel investment. This coupled with the effects of the pandemic when many establishments have had to close makes now a good time to buy a hotel in Spain. However, like all major investments, buying a hotel requires careful research and planning before you sign on the dotted line.
In this article, we look at the main aspects of hotel investment to consider before you take a decision.
Do Your Market Research
It goes without saying that researching the market is the very first step. There are currently more hotels for sale in Spain than ever, but a larger choice does not necessarily make it a better investment.
Things to think about before you look for hotels for sale:
- Research tourist statistics in the area. Are visitor numbers growing?
- Research preferred types of accommodation. What percentage do hotels account for?
- Research types of hotels on the market. If there’s a high number of a certain type of establishment, e.g. boutique hotels, find out why.
- Decide what role you want in the hotel. Owner but not manager? Owner and manager?
Decide Who will be the Owner
Once you’ve picked your area to buy a hotel in Spain, decide if you are going to buy as an individual or a company.
Buying in your own name will make the business easier to run in terms of paperwork and tax. It will also keep the purchase process simpler. Buying in a company name makes things slightly more complex, but will mean that you and the other shareholders are not personally liable for any of the company (i.e. hotel) debts.
Take professional advice on which ownership model is best for your circumstances. Find out about setting up a company in Spain.
Decide Whether to Buy or Rent
Many businesses for sale in Spain offer prospective buyers the option to buy outright or to lease. The latter is known as traspaso in Spanish.
Purchasing a hotel is more expensive than a lease, but ownership is 100% yours. And you are free to sell the hotel to someone else in the future.
Leasing a hotel is cheaper (a traspaso usually costs around 10% of the purchase price), but you have to pay a monthly fee and you do not own the hotel.
Examine the Hotel as a Business
Now that you know which hotel to buy in Spain, who is going to buy it and whether to buy or lease, it’s time to look into the actual business of the hotel. This involves careful research and may take some time.
Running a hotel involves staff and employees make up one of the highest costs. When buying a hotel, look at the following:
Number of employees – read their contracts and find out what their salaries and social security contributions are.
Under-staffed – are there enough staff to run the hotel to the standards guests expect? If not, how much would it cost to employ more?
Over-staffed – are there more employees than necessary to run the hotel as a viable business? If so, how much would it cost to make the excess employees redundant?
Next, turn your attention to the administrative side of the hotel business. Check the following:
Opening licence – is it transferable to your name or company? Is it still valid?
Grants and subsidies – has the hotel received any and under what the conditions? If there are any conditions, find out what you need to do to fulfill them.
Unless you are planning to rename and rebrand the hotel, check that when you buy you also purchase the right to own and use the name, logo and branding (including website and social media accounts).
Read about the process for buying property in Spain.
Providers and Suppliers
Check all the contracts that the current hotel has with:
- Booking platforms
- Travel agents and tour operators
- Suppliers of goods and services
Read the terms and conditions in the contracts and check the following:
- That the contract is fair and a good deal for your business.
- That the contract may be transferred to the new owner.
- The costs of changing or cancelling a contract if necessary.
Find out if the hotel is involved in litigation of any kind and what this means for your new business.
Examine the Hotel as a Building
It’s also important to research the legality of the hotel building itself. You should check the following:
Permissions and licences – make sure that any work done on the hotel over the last five years has the correct planning permission and licences.
First-occupation licence – if the hotel is a new build, ensure it has a first-occupation licence issued by the local council.
Health and safety measures – check that the hotel complies with health and safety regulations.
Get Professional Advice
If you’re planning to buy a hotel in Spain, we recommend taking professional advice to ensure you can make a decision with all the right information. At Costaluz Lawyers, our team of experts cover all the aspects mentioned in this guide. Get in touch for a free consultation to find out how we can help you make the best investment.