Selling a Hotel: How Should You Compare Cash and Instalment Offers?

When comparing cash and instalment offers for a hotel sale, first put the receipts on the same time basis, then assess the funding gap at completion and the protection for outstanding payments separately. A higher instalment price may be preferable only if the compensation for waiting, the prospects of recovery and the seller's own funding needs are acceptable.

Suppose the same hotel receives two offers. Buyer A will pay RMB 100 million in full at completion. Buyer B offers RMB 110 million, paying RMB 40 million at completion and RMB 70 million two years later. The extra RMB 10 million looks attractive. The owner's decision is whether that difference justifies two years of waiting and an outstanding claim against the buyer.

Establish what each offer actually includes

Before comparing offers, confirm that they cover the same assets or interests and comparable debt, tax, cost and completion arrangements. A property sale and a share sale, or an offer assuming debt and another requiring the seller to repay it, cannot be compared on headline price alone. This article assumes those conditions are equivalent and focuses on payment terms.

Payment by instalments means the buyer pays the consideration in stages under the contract. Seller financing may instead create a separate loan from the seller to the buyer. Other payments may depend on operating targets or other conditions, leaving the amount uncertain. Show these arrangements separately rather than grouping them as future receipts and treating them as cash already collected.

There is a disclosed example of this risk in hotel transactions. In the notes receivable disclosure in its 2025 annual report, Host Hotels & Resorts described a loan related to a hotel sale, secured by the hotel sold, and quarterly assessments of credit losses. A seller can therefore retain exposure to the buyer's ability to pay after a hotel has been sold. Security does not remove the need for continuing assessment. This is a U.S. company's public disclosure, not a contract model that can automatically be applied to a project in China.

Compare the timing of hotel sale payments

Return to the hypothetical offers. For illustration, use an annual discount rate of 8% to translate future receipts into their value at completion. This rate is solely a calculation assumption, not a standard hotel transaction rate or a price for this buyer's credit risk.

Offer A provides RMB 100 million at completion, with a value at that date of RMB 100 million.

Offer B provides RMB 40 million immediately and RMB 70 million two years later. Dividing the latter by 1.08 squared gives approximately RMB 60.01 million. Together, the receipts have a value at completion of approximately RMB 100.01 million.

Under this assumption, Offer B's additional RMB 10 million in nominal consideration leaves it almost level with Offer A when timing is aligned. This does not establish that its outstanding payment will be received in full and on time.

In an actual comparison, finance should explain the basis for the discount rate and test whether the conclusion holds under different reasonable assumptions. If the rate already includes compensation for a particular credit risk, coordinate it with separately modelled loss scenarios to avoid deducting the same risk twice. Complex transactions require valuation and financial specialists; an arbitrary percentage should not determine which offer is preferable.

What if the final payment arrives a year late?

Using the same assumptions, if Offer B's RMB 70 million payment moves to the end of year three without additional compensation, its value at completion falls to approximately RMB 95.57 million.

If a further stress scenario assumes that only 80% of that final payment, or RMB 56 million, is recovered at the end of year three, the value falls to approximately RMB 84.45 million. Neither the delay nor the loss percentage is an estimate of a particular buyer's default probability. Recovery costs are also excluded.

These calculations show how sensitive the comparison is to payment conditions. If a modest delay changes the preferred offer, negotiations should address payment triggers, verifiable funding sources and contractual treatment of delays, alongside headline price.

An instalment offer working under an on-time scenario is insufficient. The seller needs to understand whether it can withstand departures from the plan, which terms may mitigate their effects and which risks cannot be guaranteed away by a contract.

Check the completion funding gap separately

Similar present values do not mean both offers meet the seller's immediate payment needs.

As another assumption, suppose RMB 60 million must be paid at completion for debt repayment, taxes or other obligations. Offer B brings in RMB 40 million that day, leaving a RMB 20 million funding gap. The RMB 70 million receivable in two years cannot directly pay today's obligations.

Check whether a firm funding source covers that gap, when it becomes available, and its costs and conditions. An unconfirmed borrowing facility should not be presented as a resolved funding arrangement. If additional financing is needed, include the resulting cash outflows in the comparison and maintain consistency with the discounting approach to avoid counting financing costs twice.

Where completion depends on releasing an existing mortgage or repaying specified debt, verify the payment arrangements with the lender and transaction advisers. Do not assume completion is achievable and leave the funding conditions necessary to achieve it until the end.

Examine the specific protection for outstanding payments

A buyer's statement that a payment is guaranteed is insufficient to assess recovery. Establish who owes the payment, who provides the guarantee, what amounts it covers, how long it lasts and the procedures required to enforce it.

Where the arrangement relies on collateral, check the evidence for its value, existing encumbrances, priority of claims and restrictions on disposal. A buyer's future asset sale or refinancing may be a repayment source, but it should not be treated as committed cash without verification.

Transaction lawyers and other relevant specialists should examine the original documents against the rules in the project's jurisdiction. The owner needs conclusions that support a decision: which protections are in place, which remain conditional, and the possible time and cost of pursuing a delayed payment. This article supplies no universal contractual terms across jurisdictions and does not equate security with full recovery.

Put the offers into one comparison

Before selecting a buyer, finance can prepare a one-page payment comparison, with an offer in each column and the following five areas as rows.

Comparison basis: confirm equivalent sale scope, debt and cost responsibilities, completion dates and principal conditions. Identify adjustments where these differ before ranking the offers.

Receipts: show funds actually available at completion, each subsequent payment, dates, interest and additional conditions. Show conditional amounts separately.

Timing and risk: state the value at completion and its calculation basis, alongside scenarios for delays, partial non-recovery and recovery costs. Distinguish contractual facts from modelling assumptions.

Completion funding: show obligations due that day, available receipts, any funding gap, confirmed sources to cover it and associated costs.

Protection and decision: identify the payer, protections and documents still to be verified, outstanding conditions, and reasons to adjust price or payment terms or defer the choice.

Finance prepares the cash timeline, transaction lawyers examine payment and protection conditions, and the owner decides what waiting period and risk are acceptable. A completed comparison should trace every material receipt and payment to an offer, contractual term or verified funding arrangement. Filling every cell does not eliminate unresolved material evidence.

Instalments can be appropriate

Where a seller has no pressing cash obligations, compensation for waiting is proportionate to the risk, and the payer's financial capacity and protections can be substantiated, instalments may widen the available transaction choices and provide a reasonable financing return.

A cash offer also requires credible payment conditions and an achievable completion. The words “payment in full” do not replace verification of the buyer's funds.

The comparison ultimately asks which offer provides greater value within the seller's capacity to accommodate the cash schedule and risk. Have finance and transaction advisers verify that comparison before selecting the buyer. It brings the discussion closer to the owner's actual decision than debating headline prices alone.

Source: Host Hotels & Resorts, 2025 Annual Report, Notes Receivable disclosure. The offers, discount rate, payment dates, funding gap and stress scenarios in this article are methodological illustrations, not actual projects or uniform market standards.