By Chase Keller, CCIM
In a previous post, I wrote about why putting off the sale of your hotel property is almost certainly going to erode your profit from the sale. Most owners, if they’re waiting for the “right” time to sell, find out, to their dismay, that the right time was probably a couple of years ago. There are several factors to consider.
For most owners, there are three main exit strategies: hold and keep operating; plan a sale “down the road”; sell in the near term, more or less as-is; or invest, reposition a bit, then sell with a clearer story and cleaner property. Here’s a side-by-side comparison of each option:
Option 1: Hold the property for another 3-5 years. Almost every owner, when pressed, lists 3-5 years as their sale horizon. I get it. That feels like a safe plan, far enough in the future so that no urgent action is required today, but not so long that the world feels like it might be a different place altogether.
When this strategy makes sense: You still have plenty of energy, the property is not heavily burdened by a Property Improvement Plan (PIP), and you genuinely enjoy owning it. The pros include continued, reliable cash flow, with potential upside if the market or brand positioning improves.
The cons: greater exposure to costly PIPs, potential for more local competition, rising interest rates, and a slowing economic cycle. You’re betting that the time, energy, and capital you have invested so far will get you to the finish line based on your profitability numbers today. You’re standing firm, but as I said in Part One, the world certainly won’t be standing still.
Option 2: Sell in the near term (as-is or close to it). Bring the property to market now with realistic expectations and a clean story, without trying to make everything perfect first.
When this strategy makes sense: You’re mentally closer to the exit than the 3-5 year window, the financial burdens of PIP and capital investments are starting to feel heavy, but your lender terms are still reasonable. The pros include passing future risk and capital requirements to the next owner, while locking in today’s value and freeing up your time and equity.
The cons: Selling near-term can feel like taking a haircut versus what the asset could be after another year and a few upgrades. The catch is that upside usually requires more time, capital, and cooperation from the market. In practice, you may be trading uncertain upside for measurable control.
Option 3: Make some targeted investments, then sell. You could make selective upgrades or address specific PIP items that materially improve how buyers and brands view the property, then put it on the market. This approach requires strategy and a good understanding of what consumers want and what buyers are willing to pay for.
When this strategy makes sense: There are probably two or three high-impact upgrades that will immediately return value: improving the rooms packages, sprucing up the exterior, and investing in technology such as key building systems and Property Management Systems to improve efficiency and the customer experience. These will definitely move the needle and change buyer perception and brand risk. The pros also include increasing the property’s asking price and making the deal more attractive to both buyers and lenders.
The cons: They are pretty obvious. This strategy requires capital, incurs construction risk, and takes time. If any of these factors shift, you’ve invested more only to face the same exit dynamics (with more debt) as you did before the improvements.
What strategy is best for you? One run with real numbers. In a spreadsheet, one of these usually stands out once we plug in real numbers instead of relying on a gut feeling. Here’s a simple example using real-world (rounded) numbers:
Say your hotel is doing about $1.8M in annual room revenue, with roughly a 35 percent Net Operating Income (NOI) margin. That’s about $630,000 in NOI. In today’s market, at around an 8.0x multiple, the as-is value might pencil out near $5.0M. Now add a PIP estimate of $700,000 sitting on your desk.
Option 1 – Hold for five years: You keep operating. Over that time, you chip away at some of the PIP, other items pop up, and you end up spending $900,000–$1.1M over several years. Maybe you sell later at $5.2–$5.4M, but after that extra investment, five more years of your time, and normal sale costs, your true net may not be much better than what you could have locked in earlier—and sometimes it’s worse.
Option 2 – Sell now as-is: You bring it to market today. Buyers see the $700k PIP and price it in; instead of the full $5.0M, realistic offers might land closer to $4.4–$4.6M. After debt payoff and costs of sale, your net might feel a bit lower than what you’d hoped—but you’re out, your future capital expenditure risk is zero. That, and the next PIP cycle belongs to someone else.
Option 3 – Make targeted investments, then sell: You put $350,000–$450,000 into the highest-impact items: what the guest sees first and what the brand/lender worries about most. You clean up the story, maybe tighten operations a bit, and modestly increase NOI. In that scenario, a sale of around $5.0–$5.2M can be realistic, with buyers and lenders more comfortable and less likely to renegotiate terms downward after diligence. After factoring in your targeted spend, your net can beat both “sell as-is now” and “hold and grind it out” in many cases.
You don’t need to obsess over the math. The point is that once we plug your real numbers into a simple side-by-side like this, the “quiet cost of waiting” stops being a fuzzy feeling. Instead, it becomes something you can actually measure—and base a decision on.
