What special considerations apply to buying a hotel or motel property in Ontario beyond a typical commercial deal?

Buying a hotel or motel is rarely just a real estate transaction — it's usually also buying an operating business, and due diligence needs to reflect both sides. Beyond the property itself, a buyer typically needs to review any franchise or brand management agreement tied to the hotel, which can come with its own renewal, termination, and standards obligations, furniture, fixtures, and equipment included in the sale, existing bookings and reservations that will carry through closing, and employees who work on-site.

Valuation also tends to work differently than for a typical single-tenant commercial building. Because a hotel's income depends on occupancy and room rates rather than a fixed lease, buyers and lenders often rely more heavily on an income-based approach tied to the operating business's financial performance, rather than comparable sales or a simple capitalization of lease income.

Licensing is another layer: food and beverage service, liquor licensing, and other regulatory approvals tied to hotel operations need to be addressed as part of the deal, since these attach to the operator rather than automatically transferring with the real estate. Given these added dimensions, hotel and motel purchases usually call for a broader due diligence team than a standard commercial building purchase.