What due diligence do I need before buying a hotel?

The Uniform System of Accounts for the Lodging Industry is the standard format for hotel financial statements. Its 12th revised edition was adopted on January 1, 2026.^[2] Ask for three years of monthly profit and loss statements plus the trailing twelve months, then map every line to USALI departments so the hotel can be compared with others. An owner-operated hotel often shows no management fee, a family payroll that a new owner cannot match, and no reserve for replacing furniture and equipment. Each one overstates the income a buyer or lender will underwrite, and the worked example below shows how much that can move price.

Then test the revenue. Tie monthly room revenue to the property management system's night audit reports, to occupancy tax filings and to bank deposits. Revenue that appears in the P&L and in none of those three is the red flag that matters most. Net operating income is defined at NOI.

Hilton's Hampton disclosure defines the measure plainly: RevPAR index is the hotel's RevPAR divided by its competitive set's RevPAR, times 100, and an index above 100 means the hotel takes more than its fair share.^[5] Ask the seller for the monthly STAR reports covering the same three years as the financials. Look at the trend, not one month. A falling index with stable market RevPAR points at the hotel itself: condition, management or reviews. Check which hotels are in the competitive set too, because a set of weaker hotels flatters the index. The terms are defined at RevPAR and ADR. STR data is licensed, so the seller shares it under the confidentiality agreement and you cannot republish it.

ASTM E2018-24 is the current standard guide for a baseline property condition assessment of commercial real estate.^[1] The report lists physical deficiencies and the cost to cure them, which gives you a capital plan alongside the brand's PIP.

The 2026 ALTA/NSPS Land Title Survey standards took effect on February 23, 2026 and replaced the 2021 version.^[3] Title insurers and lenders use the survey to evaluate title matters such as boundaries, easements, encroachments and access.^[3]

ASTM E1527-21 is the standard practice for a Phase I environmental site assessment.^[4] EPA's rule on all appropriate inquiries names E1527-21 as a standard that may be used to comply.^[8] ASTM says the practice is meant to let a buyer satisfy one of the requirements for the landowner liability protections under the federal Superfund law.^[4] Hotels near former gas stations, dry cleaners or industrial sites need the closest reading.

Hilton's 2025 Hampton disclosure sets out what a change of ownership takes. The seller gives 60 days' written notice. The buyer must meet the brand's current requirements for new franchisees, which the document lists as credit, a background investigation, operations experience and prior business dealings. The buyer submits a change of ownership application, pays the application fee, signs the current form of franchise agreement and agrees to the brand's request for upgrades.^[5] The schedule lists a $200,000 application fee and a $10,000 PIP fee.^[5]

Two more items from the same document. Hilton may require an independent survey by an ADA consultant in a change of ownership.^[5] If your lender needs a comfort letter from the brand, Hampton charges $3,500 to process one, and issues it only if the request meets its qualifications.^[5] Other brands differ, so read Items 5, 6 and 17 of the current disclosure document for your brand. The PIP itself is explained at PIP.

A hotel with a bar, a restaurant or a market that sells beer and wine cannot serve under the seller's license once the seller is gone, unless the state has approved the change. California is one example of how long that takes. The state's Department of Alcoholic Beverage Control says most investigations for the issuance or transfer of a license take about 55 to 65 days, and that by law a license cannot be issued for at least 30 days.^[6] It also allows the buyer to operate during the transfer under a 120-day temporary permit, if the premises are currently licensed and have been operating within the past 30 days.^[6] Other states work differently. Ask a local liquor license attorney in the first week, because this approval can outlast every other item on the list.

WARN covers employers with 100 or more employees, not counting part-time employees.^[9] It requires at least 60 days' notice of a plant closing or mass layoff.^[10] In a sale, the seller is responsible for notice of any covered event up to and including the effective date of the sale, and the buyer is responsible after that.^[11] Many smaller hotels fall under the threshold. A large full-service or resort hotel may not, and some states have notice laws of their own. If you plan to change the management company or re-staff, settle who gives notice in the purchase agreement.

The length of the diligence period is a negotiated term of the purchase agreement, so the contract you sign sets your real deadline. The slow items are the ones with outside parties: the brand, the liquor authority, the lender's appraisal and the third-party reports. Order the property condition assessment, the survey and the Phase I in the first week, file the franchise application at signing, and leave the last weeks for negotiating what the reports found. The seller's view of the same calendar is at How long does it take to sell a hotel?, and the documents a seller should hand over are listed at Documents needed to sell a hotel.

Guide

How do I buy a hotel?

Other questions in this guide

• How much money do I need to buy a hotel?
• How do I buy my first hotel with no hotel experience?
• Should I buy a branded or independent hotel?

Terms defined in the glossary

• Net Operating Income (NOI)
• RevPAR (Revenue Per Available Room)
• PIP (Property Improvement Plan)
• Hotel Cap Rate

Our own data

• Matthews Hotel Index, Q1 2026