How Much Does It Cost to Buy a Hotel?

From quaint small roadside motels to lavish 5-star skyscraper resorts, hotels make up one of the world’s largest investment asset classes. But actually purchasing an entire hotel property remains financially out of reach for most buyers. So how much capital does it realistically take to buy into hotel ownership?

Hotel Purchase Cost Considerations

True purchase prices for hotels vary wildly based on:

• Location – Prime tourism/business destinations demand premium valuations, especially in dense cities where buildable land remains scarce. Remote rural hotels cost comparatively tiny fractions.
• Size – Room count, acreage, and total square footage majorly impact valuations. Costs run from a few hundred thousand for tiny motels up to a billion dollars for Vegas mega resorts or historic grand hotels.
• Star Rating – Budget chains like Motel 6 or Super 8 value far lower than Ritz Carlton or Four Seasons luxury in desired markets. Rate of return expectations also differ greatly.

On average, investors estimate paying between $100,000 to $500,000 per rentable hotel room within the deal. This covers the physical real estate, fixtures, equipment, inventory, branding rights and operational business valuation combined. Let’s explore typical range brackets.

Small Roadside Motels

At the lowest spectrum, independent one-off motels along motorways or outskirts of small towns frequently list around $750,000 to $4 million assuming average 50-100 room size. Mom-and-pop owned establishments in non-prime areas make up the majority of limited service hotel inventory industry-wide.

Midscale Branded Hotels

Branded chain hotels from trusted names like Hilton, Marriott and IHG in decent B-grade spots usually start around $7 million for just 100 rooms. Most midmarket franchised hotels fall between $10 million to $30 million depending largely on room count, location, and chain scale (upper-midscale vs economy tier).

Full-Service Hotels & Resorts

Nicer full-service suburban hotels and smaller boutique urban resorts generally sell between $20 million up to around $250+ million in top-tier leisure destinations. Larger convention hotels in big cities run higher thanks to massive ballroom/event space.

Luxury Trophy Hotels

At the highest end, marquee 5-star luxury hotels in places like NYC, Hawaii, Vegas or Beverly Hills can command jaw-dropping sale prices from $300 million up to as high as $1+ billion at recent market peaks. These trading prices set national records for individual hotel real estate transactions.

But those numbers reflect rare trophy asset outliers during bubbles moreso than norm. In actuality, over two-thirds of all US hotel property deals worth more than $10 million cap out around the $30 million mark for about 150 to 400 rooms according to industry sales data.

What Factors Increase Hotel Values?

Desirable locations, reputable branding, and extensive amenities/services attract high-paying guests over longer stays. This translates into better profit margins that directly enhance hotel valuation multiples. Specificattributes investors pay premiums for include:

• Prime Locale – Beachfront, city center, entertainment district, ski village, etc. Scenic access drives rates and demand significantly higher long-term in top destinations that retain value over time.
• Strong Brand – Flags like Ritz Carlton or Park Hyatt signal unwavering luxury standards across locations that guests trust when selecting hotels sight unseen. Even mid-tier brands carry Good Housekeeping-style seal assurances.
• Great Reviews + Recognition – 3rd party review scores and hospitality accolades telegraph excellent guest sentiment and prestige that compress marketing costs significantly over time.
• Spa/Fitness/Dining – Luxury travelers desire outstanding wellness, cuisine and relaxation onsite to create 5-star experiences worthy of repeat visits and word-of-mouth referrals. These services raise daily revenues beyond just rooms alone.
• Meeting Space – Large conference and event venues allowing hosting huge company retreats, lavish weddings or conventions year-round provide invaluable stable group income buffering against seasonal downtimes.
• Extended Stay Options – Spacious apartment-style suites with full kitchens attract higher-paying weekly/monthly guests from relocating families to business travelers on projects. Insurance housing accounts offer lucrative B2B revenue too.

So while buying an average hotel with as few as 100 rooms starts around $10 million, the sky remains the limit for trophy resorts or large convention hotels in top global destinations that trade into the billions. Location and luxury ultimately drive the highest hotel valuations when exploring purchase options.