Buying a Hotel in Cyprus: How to Assess Profitability and Risks

Before viewing a hotel, clarify whether you are buying an operating business with staff and an established reputation or simply a building where operations still need to be set up. These scenarios require different budgets and different expertise.

Which figures reveal a hotel's financial performance?

Start with monthly revenue over several seasons. Compare room occupancy, average daily rate (ADR), and revenue per available room (RevPAR). Look beyond annual averages: the high season can conceal months when revenue barely covers fixed costs.

Review spending on payroll, housekeeping, energy, booking platform commissions, repairs, insurance, and marketing. Account separately for capital expenditure, including the replacement of furniture, kitchen equipment, air conditioning systems, and pool equipment. The net profit shown in the seller's accounts does not necessarily represent the cash flow available to a new owner.

Risks that photographs cannot reveal

Access, parking, proximity to the beach, and local amenities all matter, but so do staff availability and competition. A small hotel may depend on a single manager or a few major travel partners. If those relationships end after the sale, the profit forecast changes.

Legal due diligence should cover the property, business assets, supplier contracts, employment obligations, and rights to the brand or booking system if they are included in the transaction. Establish which licences are in force and whether they can remain valid or be transferred or reissued following a change of ownership.

How are day-to-day hotel operations managed?

During the viewing, discuss how the hotel operates each day: how staff schedules are prepared, who monitors housekeeping standards, and how long it takes to prepare a room between guests. Ask about the reasons behind negative reviews and how recurring complaints are addressed.

Check whether the hotel has the capacity and funds to carry out repairs without closing completely. Your financial model should account for normal seasonal fluctuations as well as a period when the hotel may need to rebuild its reputation or replace its management team.

How to test the resilience of the financial model

Build three financial scenarios: a base case, a conservative case, and a stress case. Include refurbishment costs and a reserve for the low season. A sound investment depends on financial performance that stands up to documentary checks and adverse assumptions, rather than an attractive promotional forecast.