The quick answer
Hotel due diligence checks the law, the accounts, the building and the contracts. It rarely prices the refit: works, FF&E, OS&E, soft costs and the revenue lost while rooms are closed. Without that number, the purchase price has no context. A budget and works feasibility, done before the go / no-go, tells you whether to proceed, renegotiate the price, phase the works or walk away.
A hotel that looks perfect on paper
Picture a founder who has just sold her company. Her holding company has three years to reinvest the proceeds, and a hotel comes up: great location, loyal guests, a seller's plan that talks about a "light refresh". The data room is tidy. The legal, tax and financial reports are clean.
One number is missing, and it is the one that decides the return: what the refit will really cost, and how long the hotel will be closed while it happens. The calendar pushes toward a quick yes. That is exactly when a feasibility is worth the most.
Which kind of deal are you doing?
The structure of the deal decides what due diligence must cover, and who carries the refit risk.
Walls and business (walls + going concern): you buy the property and the operating business. You inherit the staff, the contracts, the brand obligations and the condition of every room. The refit risk is entirely yours.
Operating company (share deal): you buy the company that runs the hotel, with its history and its liabilities. Legal and employment checks go deeper, and the refit need can hide inside the balance sheet.
Walls only (leased to an operator): your exposure depends on the lease. Who funds the renewal of FF&E and OS&E, and who pays for major works, is written in the contract. You do not control the refit calendar.
Hotel to renovate: the price is lower, but the refit is the investment. The feasibility is the deal.
New build: nothing is inherited, everything is budgeted. FF&E and OS&E start from zero and must be planned with the construction budget.
Due diligence, layer by layer
A solid hotel due diligence has eight layers. For each one, know what you check and what should alarm you.
Legal: title, commercial lease, going concern, operating permits, ERP fire-safety status, accessibility, planning. Red flag: works done without permits, or a fire-safety opinion with reserves.
Financial: operating accounts, RevPAR, occupancy, average daily rate, EBITDA and its restatements. Red flag: an EBITDA that only holds because maintenance has been postponed.
Contracts: management agreement, franchise, brand PIP, OTA contracts. Red flag: a brand PIP that falls due at the change of ownership.
Employment: the hospitality collective agreement (HCR), transfer of staff, ongoing disputes. Red flag: a workforce sized for a hotel that will be closed for works.
Technical: structure, HVAC, waterproofing, lifts, fire safety, asbestos, energy performance. Red flag: major systems at the end of their life.
Tax: taxation of the transaction, VAT treatment, local taxes. Red flag: a structure that only works if the timeline holds.
Insurance: claims history, coverage, conditions for works. Red flag: a policy that does not cover a closed hotel.
ESG: energy performance, regulatory trajectory, investment needed to stay compliant. Red flag: compliance works missing from the seller's plan.
Notice what is missing: nothing in this list produces a refit budget.
The gap: what due diligence rarely prices
Classic due diligence rarely puts a number on the refit, and the numbers that circulate in business plans are almost always too tight. Here is what usually stays out of the file.
The existing FF&E. Its age, its remaining life, and what must be replaced now rather than in three years. FF&E (Furniture, Fixtures and Equipment) is everything the hotel contains that is not the building: beds, seating, lighting, curtains, in-room equipment.
The OS&E to rebuild. OS&E (Operating Supplies and Equipment) covers linen, towels, tableware, uniforms, cleaning equipment and more. It is the most consistently forgotten line item in hotel budgets, typically 15 to 25% of the FF&E/OS&E budget.
Soft costs. Design fees, project management, logistics, storage, installation, snagging: up to 30%.
Procurement lead times. FF&E fabrication and delivery almost always take longer than the first schedule assumes.
The closure. Every week of closed rooms is revenue that does not come back, and a hotel that reopens late pays its financing for nothing.
The brand PIP. When the hotel is branded, the property improvement plan can be required at the change of ownership. The brand sets the scope, the deadlines and the budget.
Why are the figures so tight? Because FF&E and OS&E together represent 10 to 20% of a hotel's total investment budget, while the other 80% (structure, MEP, finishes) absorbs the attention. The line is hard to size correctly, and nobody in the process is paid to size it.
These figures are benchmarks, not a quote. FF&E budget per key: Budget (2–3 stars) €8,000–17,000; Midscale (3–4 stars) €13,000–38,000; Upscale (4–5 stars) €20,000–75,000; Luxury (5 stars and above) €55,000–150,000+. Soft costs: up to 30%. In a renovation, joinery and loose furniture can cost 10 to 40% more because they must be adapted to the existing building.
For the logic behind these ranges, see the FF&E budget per room guide and the benchmark guide. For how the money is booked, see CAPEX and OPEX in hotel FF&E and OS&E.
The feasibility in practice
A feasibility turns a building and a brief into a budget per key, a range, a phasing and a duration. It takes a few inputs and produces the outputs a decision needs.
Inputs: number of keys, standing, room mix, condition of the existing FF&E, public areas, F&B, spa, back of house (BOH), brand requirements and the target calendar.
Outputs: FF&E and OS&E budget per key and as a range, a works and procurement phasing, lead times, the length of closure, and the effect on yield.
Then compare it with the seller's figure. The gap is the real finding. It is the starting point for the price discussion, a condition precedent, a phasing plan or a no-go.
You can estimate the FF&E and OS&E part yourself with the hotel FF&E budget estimator, or learn how to create an FF&E budget for your hotel. Figurz is an independent tool: it has no interest in making a budget look comfortable, and that is its whole purpose.
For a hotel to renovate rather than to build, the works side matters just as much: our pillar article on hotel construction and renovation costs explains how the pieces fit together.
Go, no-go or renegotiate
Three questions decide the outcome, in this order.
1. Is purchase price plus refit still below your target value? The refit means works, FF&E, OS&E, soft costs and revenue lost during closure. If yes, go to question 2. If no, renegotiate the price by the size of the gap, or walk away.
2. Does the calendar fit your window? Your financing, the opening season and, if applicable, your reinvestment deadline. If yes, go to question 3. If no, phase the works, reduce the scope, or walk away.
3. Does your financing cover soft costs and the closure period? If yes, go. If no, ask for a seller credit, make financing a condition precedent, or renegotiate.
A budget gap becomes a lever in three ways: a lower price (the gap is documented, not a feeling), a condition precedent (technical access, confirmation of the brand PIP, a validated budget), or a decision to walk away before the signature rather than after.
The reinvestment clock: an illustration
For a seller who reinvests through a holding, time is part of the budget. This section illustrates calendar pressure. It is not tax advice: validate it with your tax lawyer.
Under article 150-0 B ter of the French tax code (apport-cession), if the holding sells the contributed shares within three years of the contribution, the tax deferral is kept only if at least 70% of the proceeds are reinvested in eligible assets within three years, and those assets are held for five years. Law firms and advisers report that these rules apply to sales made on or after 21 February 2026, under the 2026 Finance Act (law no. 2026-103 of 19 February 2026, article 11, published on 20 February 2026). Real-estate activities are excluded from eligible reinvestments. Hotel operation is generally described as remaining eligible, while walls alone leased to a third-party operator may be requalified as property rental. The scope is read case by case. The tax authority's commentary and the 2027 Finance Bill (filed on 1 October 2026 and still being debated on 1 November 2026) keep moving, so check the version in force at your date.
What this means for a hotel deal: three years go quickly. A feasibility that arrives after the signature, a renegotiation that drags, or a refit that overruns all consume the same window. A poorly planned closure is also a point to raise with your tax lawyer, because eligibility depends on the activity actually carried out. Nobody in the usual due diligence owns this risk. A budget and calendar feasibility does.
Conclusion: price the refit before the price
The founder from the opening does not need a longer data room. She needs one more page: the refit budget per key, the phasing, the closure period, and a go, renegotiate or no-go reading. With it, her three years work for her. Without it, they work for the calendar.
The lesson: a hotel's price is only a number until someone has priced the refit.
How many of your last hotel deals had an FF&E and OS&E line in the data room before the signature? Calculate an independent FF&E and OS&E budget before you commit: here!
FAQ
What should I check before buying a hotel?
Check eight layers: legal, financial, contracts, employment, technical, tax, insurance and ESG. Then add the one that is usually missing: a feasibility of the works and of the FF&E and OS&E budget, with the closure period. Without it, you know the building's past but not the cost of its next cycle.
What budget should I plan to renovate a hotel I just bought?
Start with the FF&E budget per key for the hotel's standing: €8,000–17,000 (2–3 stars), €13,000–38,000 (3–4 stars), €20,000–75,000 (4–5 stars), €55,000–150,000+ (5 stars and above). Add soft costs of up to 30%, and in a renovation expect 10 to 40% more on joinery and loose furniture. These are benchmarks, not a quote: a feasibility on your own hotel replaces them.
Walls only or walls and business: what is the difference for an investor?
With walls and business, you own the property and run the operation, so you carry the refit risk and decide the calendar. With walls only, an operator leases the hotel from you, and the lease decides who funds the renewal of FF&E and major works. The structure also changes the tax reading of a reinvestment, so validate it with your tax lawyer.
What is a PIP when I buy a branded hotel?
A PIP, or property improvement plan, is a programme of renovation works, often including replacing FF&E and OS&E, that a hotel brand requires from the owner to bring the property up to brand standards. It is typically triggered by a change of ownership, or by signing or renewing a franchise or management agreement. A buyer should price it into the acquisition.
Does a hotel acquisition still qualify for apport-cession reinvestment?
Advisers generally describe hotel operation as remaining an eligible activity after the 2026 Finance Act, while real-estate activities are excluded and walls alone leased to a third party are fragile. The answer depends on the structure and on the version of the rules in force at the date of sale. Validate it with your tax lawyer before signing.
Sources
Loi n° 2026-103 du 19 février 2026 de finances pour 2026, Légifrance (published 20 February 2026)
Gide, PLF 2026 – Article 150-0 B ter : l'immobilier mal-aimé (26 January 2026)
Profession CGP, tribune by Balestra, a hotel-investment provider: l'hôtellerie économique, le rare rescapé d'une réforme (26 February 2026)
Mayer Brown, Projet de loi de finances pour 2027 (8 October 2026)
