When the Owner Leaves: Buying a Family-Run Hotel in Latin America

Years ago, my wife and I built and ran a small, four-room hostel in Barranco, Lima. We did practically everything ourselves: cleaning, welcoming guests, finding bookings and dealing with whatever problems came up during the day. Some evenings, we ended up having a beer with our guests by the fireplace.

It was a small business, but in Latin America, even hotels with 100 rooms or more can be owned and managed by a family in much the same way. That experience taught us that part of what keeps a hotel running may depend on people who do not even appear on an organisational chart.

If someone had wanted to buy our business, the rooms, furniture and bookings would have been relatively easy to identify. What would have been less obvious was what would happen to the operation once we were no longer there.

Profit Does Not Always Tell the Whole Story

In many family-run hotels across Latin America, the owner is also the general manager, the person responsible for sales and, when necessary, the one who fixes a problem or welcomes a guest in the middle of the night.

In many cases, this produces remarkably efficient businesses. A committed family can sometimes achieve results that a conventional management structure would struggle to match.

But what happens when those figures are presented to a buyer as though the hotel could continue operating in exactly the same way after the sale?

We once worked with a hotel in Cusco that reported an annual operating profit of US$250,000. The owner did not receive a market-rate salary, his wife supervised reservations, and a family member who also owned a travel agency handled commercial relationships. He was particularly effective, and his channel generated more than 50% of the hotel's bookings.

The figures were perfectly real. But when we presented the property to prospective buyers, we also needed to explain that some of those functions would have to be replaced. A new owner would need to hire staff, take on additional costs and perhaps change the way the hotel was organised.

That US$250,000 did not quite represent the same level of profitability for a future owner.

Guests Can Also Depend on a Person

In an independent hotel managed by the same family for decades, part of the clientele often comes through relationships built over many years: travel agencies that know the owner personally, tour operators who trust him, local companies that book directly, or returning guests who know who will be welcoming them.

Not all those relationships disappear when ownership changes, but some may be lost.

It is worth understanding who maintains those relationships, who negotiates the rates and which commercial arrangements can actually continue after the acquisition.

The same applies to certain restaurants, lodges and boutique hotels whose identity is closely tied to the founder. A buyer may want to preserve that identity, but needs to understand how to maintain it when the person who created it is no longer there.

The Seller Is Not Necessarily Wrong

Owners sometimes feel uncomfortable when buyers raise these questions.

We need to put ourselves in their position. These are people who may have spent twenty or thirty years building a hotel, developing a loyal clientele and getting to know every corner of the business. When a buyer starts deducting additional salaries, questioning commercial relationships or raising concerns about the transition, they may feel that their work is being undervalued.

Precisely because that work has value, we need to understand how to preserve it. The buyer may be acquiring much more than a property, but also needs to know how much of the hotel's performance depends on people, relationships and responsibilities that may not remain after the sale.

This matters anywhere in the world, although I would say it is particularly relevant in Latin America, where many transactions involve family businesses and commercial relationships built over decades.

An owner who wants to retire and is willing to help with the transition is not in the same position as a family that needs to exit quickly, or a founder who wants to sell a majority stake but remain involved in management. Different situations call for different solutions.

When the Transition Becomes Part of the Negotiation

One solution may be to agree on a period during which the owner stays involved, with clearly defined responsibilities, compensation and duration.

In other transactions, it may make sense for the existing manager to remain, for certain commercial relationships to be transferred gradually, or for part of the purchase price to depend on future performance.

Not all these structures are suitable for every hotel. A contingent payment, for example, can create disagreements if the seller no longer controls the decisions that directly affect the business's results.

There are also owners who want to keep the property but no longer manage the hotel. In those cases, the discussion may move towards a lease or bringing in a specialised operator rather than selling the entire business.

These alternatives need to be considered according to the asset, the expectations of both parties and the actual capabilities of whoever will take over the operation.

The important thing with these hotels is not to treat dependence on the owner automatically as a defect that makes an acquisition unattractive. It is a commercial reality that needs to be understood and, where possible, addressed through a reasonable agreement.

What Actually Changes Hands

Some hotel owners have built organisations that can operate without them. In other cases, the decision to sell comes while much of the business still depends on the owner's decisions, relationships and daily involvement.

Both can be attractive assets. But before bringing buyer and seller closer together, we need to understand what the owner wants to leave behind and what the buyer is prepared to take on.

A poorly planned transition can damage a business that has operated successfully for years. A well-negotiated one can allow the seller to step away without undoing what they have built, while giving the buyer a business they can actually manage.