Glossary

The terms of hotel transactions, explained simply, with how they are used in a sale.

Letter A

Asset deal
An asset deal is the direct sale of the hotel’s assets (the building, the business or both): the selling company remains in existence and keeps its liabilities.
Average daily rate (ADR)
Average daily rate (ADR), or prix moyen in French, is net rooms revenue divided by the number of rooms sold over the period.

Capitalisation rate (taux de capitalisation)
Ratio between the net income of a building and its market value excluding transfer costs, used to value a property by capitalising its rent or operating income.
Commercial lease (bail commercial)
The French commercial lease, or bail commercial, is the contract under which a landlord lets premises to an operator for a commercial activity, under a regime giving the tenant a right of renewal.
Completion (closing)
The date on which the sale takes effect: the conditions precedent are met, the price is paid and ownership of the asset or shares passes to the buyer.
CPI professional licence (carte professionnelle)
Licence issued by the French chamber of commerce (CCI) that authorises, under the loi Hoguet, acting as an intermediary in transactions on property and businesses.

Data room
The data room is the document repository, usually virtual, in which the seller makes available to shortlisted buyers the documents needed for their due diligence, with named and logged access.
Due diligence
The set of audits carried out by the buyer, or on the vendor’s behalf, to verify the information provided on an asset: accounts, legal, tax, employment, technical and safety.

EBE (excédent brut d’exploitation)
EBE (excédent brut d’exploitation) is the French measure of operating profit before depreciation, provisions, finance costs and corporate tax, close to EBITDA, and a common basis for hotel valuation.
EBITDA multiple (multiple d’EBE)
Ratio between the value of a business and its adjusted EBITDA (EBE in French), used to estimate or compare the value of a hotel business or hotel company.
ERP (établissement recevant du public)
French category for buildings open to the public. A hotel is a type O ERP, subject to the fire-safety and accessibility rules of the French Construction and Housing Code.
Exclusive mandate
Written mandate in which an owner entrusts a single intermediary, for a limited period, with finding a buyer and negotiating the sale of its asset.

GOP (gross operating profit)
GOP (gross operating profit) is a hotel’s total revenue less operating department costs and undistributed expenses, before management fees and owner’s costs.

Hotel business (fonds de commerce)
The hotel business, or fonds de commerce, is the set of assets used to operate a hotel (goodwill, trade name, lease rights, furniture, equipment, licences), excluding the building itself.
Hotel franchise
A hotel franchise is a contract under which an independent operator runs its hotel under a network’s brand, with its standards and distribution, in return for fees.
Hotel management agreement
A hotel management agreement (contrat de management) is a contract under which a hotel owner entrusts operations to an operator paid by fees, while retaining the operating risk.
Hotel star rating (classement hôtelier)
Award of a one- to five-star category to a hotel, at the operator’s request, after checking compliance with a set of criteria. In France, it is granted by Atout France.

Information memorandum
Named, numbered document provided under NDA that sets out the asset, its trading performance, legal framework, the proposed transaction and the sale process in detail.

Letter of intent (LOI)
Document in which a buyer sets out its offer (price, perimeter, financing, conditions precedent, timetable) and usually asks for a period of exclusivity.
Loi Hoguet (Hoguet Act)
French Act no. 70-9 of 2 January 1970 regulating intermediaries in transactions on property and businesses: professional licence, financial guarantee, written mandate.

Murs et fonds (property and business)
A murs et fonds sale covers both the hotel’s property (the walls, or murs) and the business that operates it (the fonds de commerce): the buyer becomes owner and operator.

Non-disclosure agreement (NDA)
Contract in which a prospective buyer undertakes to keep the information it receives on an asset confidential and to use it only to assess the transaction.

Occupancy rate
A hotel’s occupancy rate, or taux d’occupation in French, is the number of rooms sold divided by the number of rooms available over a period, expressed as a percentage.
Off-market
A way of selling with no advertising or listing, in which the asset is presented individually to a small number of qualified buyers after a non-disclosure agreement is signed.

RevPAR
RevPAR (revenue per available room) is net rooms revenue divided by the number of rooms available over the period, which equals occupancy multiplied by average daily rate.

Sale and leaseback
A sale and leaseback is the sale of a hotel’s property by its owner-operator to an investor who immediately leases it back: the operator keeps the business and releases capital.
Sale and purchase agreement (protocole de cession)
Contract setting the final terms of the sale (subject, price and price mechanism, conditions precedent, warranties, timetable) up to completion.
Share deal
A share deal is the sale of the shares in the company that owns or operates the hotel: the buyer takes over the company with its assets, contracts and liabilities.

Teaser
A teaser is a short, anonymous document presenting a sale opportunity to preselected buyers, before any NDA is signed, without revealing the asset.

Warranty and indemnity (garantie d’actif et de passif)
The share vendor’s undertaking to compensate the buyer, or the company sold, for a liability arising before the sale or a shortfall in assets that had not been disclosed.

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