Taking over a small hotel: how to analyse occupancy and costs?
Introduction
Taking over a small hotel represents a project that is both attractive and complex. Between the appeal of the hospitality sector and the reality of the figures, the gap can be significant. An occupancy rate of 60% seems promising on paper, but what about it once fixed costs are deducted?
The financial analysis of a hotel being taken over differs fundamentally from that of other businesses. Fixed costs are particularly high: rent or property costs, minimum staff, energy, insurance. These expenses run even when rooms remain empty. Conversely, variable costs follow activity but can mask structural inefficiencies.
Before committing, you must understand how to decipher occupancy indicators, identify incompressible fixed costs, and calculate the real break-even point. This guide gives you concrete tools to assess the financial viability of an establishment and avoid unpleasant surprises. Because in the hospitality industry, it is the cost structure that determines whether a given occupancy rate generates profit or losses.
📌 Summary (TL;DR)
The evaluation of a small hotel rests on three pillars: analysing real occupancy indicators (rate, RevPAR, seasonality), precisely quantifying incompressible fixed costs (property, staff, energy), and checking the proportionality of variable costs. The break-even point and warning signs (decreasing occupancy, disproportionate costs) reveal the real viability of the project before takeover.
📚 Table of contents
Priority occupancy indicators to analyse
Before taking over a hotel, ask the seller for occupancy data over at least 3 years. Essential metrics include the annual occupancy rate (number of nights sold / nights available), the rate by season, and RevPAR (revenue per available room).
These figures come from annual accounts, the booking software or cantonal statistics. In Switzerland, seasonal variations are marked: high summer season by the lakes, winter in the mountains, or regular occupancy in urban areas.
The average length of stay reveals the type of clientele. A 3-year history allows you to identify trends and anticipate future profitability.
Deciphering occupancy figures: what they really reveal
An occupancy rate of 60% can be excellent or mediocre depending on the context. Analyse the breakdown: weekday vs weekend, business vs tourism clientele, direct bookings vs platforms (Booking, Expedia).
An urban hotel with 70% occupancy during the week and 30% at weekends indicates dependence on business clients. A mountain establishment with 80% in winter and 20% in summer reveals strong seasonality.
Check the consistency between declared occupancy and recorded revenues. A significant gap signals unreliable data or problematic pricing. Compare with regional benchmarks available from cantonal tourism offices.
Identifying and quantifying fixed costs
The fixed costs of a small hotel often represent 60-70% of total costs. They do not vary according to occupancy and must be covered even in low season.
Three categories dominate: property costs (rent or mortgage), payroll, and operating expenses (energy, insurance, maintenance). Obtain precise details over 12 months to avoid unpleasant surprises.
These costs determine your break-even point. A small establishment with 10 rooms can have monthly fixed costs of 15,000 to 25,000 CHF depending on location.
Property costs and rent
Commercial rent or mortgage charges often constitute the heaviest item. In Switzerland, a commercial lease for a small hotel varies from 3,000 to 10,000 CHF/month depending on the canton and location.
Add co-ownership charges, communal and cantonal taxes (which differ greatly between Geneva, Zurich or Valais). Check the conditions of the existing lease: remaining duration, termination clauses, possibility of assignment.
If the hotel is owned, examine the mortgage conditions and the possibility of takeover or refinancing. These elements directly impact your monthly cash flow.
Staff and payroll
A small hotel requires a minimum of 1-2 full-time equivalents (reception, housekeeping, breakfast service). Gross salaries vary from 4,000 to 5,500 CHF/month depending on function and region.
Add 15-20% social charges (AVS, insurance, pension). The GastroSuisse collective agreement sets minimum salaries and working conditions in the hospitality industry.
When taking over, you often have to take on existing staff. Check contracts, seniority, and any severance payments. Payroll generally represents 25-35% of turnover for a small establishment.
Energy, insurance and maintenance
Heating and electricity weigh heavily in Switzerland, especially for an old building. Allow 1,000 to 3,000 CHF/month depending on the size and insulation of the hotel.
Mandatory insurance (civil liability, building, inventory) costs 3,000 to 8,000 CHF/year. Maintenance contracts (lift, heating, fire safety) are added at 2,000 to 5,000 CHF/year.
Swiss standards for safety and accessibility are strict. Unforeseen compliance work (fire detectors, access ramps) can generate significant costs. Request a technical audit before takeover.
Analysing variable costs and their proportionality
Variable costs evolve with occupancy: laundry (8-15 CHF/night), welcome products (3-5 CHF), breakfast (5-12 CHF), OTA commissions (15-25% on Booking or Expedia), and bank card fees (1-2%).
Calculate the average variable cost per night sold. For a small hotel, it is between 25 and 40 CHF. Check that these costs are proportional to the occupancy declared in the accounts.
Examine contracts with booking platforms. Commissions above 20% greatly reduce the margin. Identify the share of direct bookings (website, telephone) which generate better profitability.
This analysis reveals the real margin per night. If you wish to deepen the logic of cost analysis, consult our guide on evaluating margins in renovation.
Calculating the break-even point and real margin
The break-even point indicates the minimum occupancy rate to cover fixed costs. Formula: Annual fixed costs / (Average rate × Number of rooms × 365 days).
Concrete example for a hotel with 10 rooms: fixed costs of 180,000 CHF/year, average rate of 120 CHF. Break-even = 180,000 / (120 × 10 × 365) = 41%. You must therefore reach 41% annual occupancy to break even.
Caution: accounting profitability differs from actual cash flow. Allow a safety margin of 10-15% for unforeseen events (repairs, temporary drop in activity, urgent investments).
These calculations are decisive for your takeover decision. For validation by a financial expert or hospitality specialist, consult our network of partners.
Warning signs not to ignore
Certain indicators should alert you when analysing a hotel: progressive decline in occupancy over 3 years, significant gap between declared occupancy and recorded revenues, disproportionate fixed costs (exceeding 70% of turnover).
The absence of a modern booking system or digital presence limits future potential. Check customer reviews on Google, TripAdvisor and Booking: ratings below 7/10 or recurring negative comments (cleanliness, welcome, maintenance) reveal structural problems.
Check whether compliance work is required (insulation, fire safety, accessibility). These investments can represent 50,000 to 200,000 CHF depending on the condition of the building.
Visit the establishment in high and low season to observe actual activity. To understand the logic of hidden costs, read our article on unforeseen costs in taking over bars and cafés.
Taking over a small hotel requires rigorous analysis of occupancy and costs. Occupancy indicators reveal seasonality and dependence on certain customer segments. Fixed costs (rent, staff, energy) weigh heavily, even in low season. Variable costs must remain proportional to turnover to preserve profitability.
Calculating the break-even point allows you to identify the minimum occupancy rate needed to cover your costs. Warning signs (declining occupancy, disproportionate costs, excessive dependence on one channel) must be taken seriously before committing.
Are you considering taking over a hotel establishment or another business in the accommodation sector? Browse the opportunities available on Leez and access verified financial information to make your decision with full knowledge of the facts. Need support for financial analysis? Our network of experts can help you validate your project.
