Hotel purchase feasibility

[Joseph Stewart]

I am in the process of selling a commercial retail property which should net me about $2.3M or so. Have been looking at hotels (or larger multi-family) as the next move. I've owned a bar/restaurant in the past as well as a nightclub and a retail computer store, so I'm pretty comfortable with the "business side" of the hotel business and the inherent risks in this type of investment. I don't really want to get into a smaller self-managed hotel situation, though, as I'd rather hire professional management. This seems to mean I'd need something with 100+ rooms and so presumably in the $6M+ purchase range. My main question is whether this will be feasible on my own with $2.3M or if I'll need to partner up. I have great credit but don't have much liquidity beyond the building sale, and I'm not sure what the typical requirements (and/or recommendations) are for liquidity and cash reserves.  I know some hotels require more PIP than others, and that PIP can sometimes be rolled into the loan.  How do you know in advance what the franchisor will require in terms of PIP?

Other questions:

(1) What's typical for Cap ex reserves?  Since hotels require major renovations periodically I'm wondering if you typically set this aside out of cash flow or obtain financing for these regular renovations.  How frequently is major renovation typically required, and is it typically done in stages or do you shut the hotel down entirely for a period of time?

(2) Assuming we're near a "peak" in terms of the economy and hotel market, what might a typical "trough" look like in terms of revenue swings?  In other words if the hotel is seeing a RevPAR of $100 today, what might I expect in a typical recession?  $70?  $50?  I understand it's highly dependent on location etc but just wondering about a reasonable average I could use for underwriting purposes.  Does a typical well-run hotel lose money in a recession or do you more typically just swing toward break-even (or better)? 

Thanks!