Commercial, operational and technical due diligence for acquisition of the luxury hotels portfolio

THE SITUATION

An institutional investor considers acquiring the luxury hotel portfolio in the attractive tourism destinations on the Croatian coast. Smaller-sized luxury boutique hotels are located in various destinations, ranging from globally branded to developing destinations. Hotels are independently managed and affiliated with top international hotel marketing alliances positioned in the luxury segment. The investor invited us to conduct commercial, operational and technical due diligence for acquisition purposes.

THE APPROACH

Our team consisted of specialists with multidisciplinary expertise, conducted the comprehensive due diligence process consisting of market research, site inspection, commercial, operational and technical analyses, and internal workshops and discussions with hotels' management:

• Commercial due diligence was focused on two layers of analysis: external and internal. We conducted in-depth market analyses, identifying the trends in the luxury travel market, key success factors of boutique hotels, market situation and trends of the destination and region where hotels operate, competitive set analyses, benchmark KPI analysis, and market outlook. We analysed all aspects of subject hotels' commercial operation in detail and prepared in-depth swot analyses, identifying potential market risks and mitigation measures.
• Operational due diligence included properties review from the operating point of view, targeting all relevant aspects of people and processes. We assessed properties' operating model, standards and management capacities and have identified key operational risks and proposed mitigation measures.
• Technical due diligence was focused on several aspects: architectural and urban planning review, evaluation of the current state of the hotel properties (building exterior and interior, condition of technical systems) and needed investments. We identified key technical risks and provided possible mitigation measures.

THE RESULTS

• The investor got independent advice and systematic impartial analysis with recommendations needed to mitigate risks from an investment decision on acquiring luxury hotels portfolio.