How to check a hotel developer and an off-plan hotel project before you pay

Buying off plan means paying for something that does not exist yet. In a hotel project the risk is higher than in an ordinary apartment block, because there are more approvals, the operator may not yet be signed, and the finances are more complicated. Our general guide on how to verify a developer abroad is a good starting checklist. This one is specific to hotel projects and to hotel-operated units, and it describes what to check, not which projects to buy.

Why a hotel project is riskier than apartments

A residential block is judged by its building. A hotel unit is judged by a business that has to be built, licensed, branded, staffed and filled. Each of those steps can fail on its own. The land has to allow tourist accommodation, the building has to receive the right licences, an operator has to agree to run it on terms that make sense, and the financing has to hold until opening day.

Market conditions add pressure. Trade-press reports on the United States, a market with good data, describe a development pipeline stalled by high construction costs, labour shortages and expensive credit: more than 600,000 rooms in planning against about 140,000 under construction in 2026, according to summaries of those reports. That is an indicator of how hard it is to get hotels built on schedule, not a statement about your project's country. But it explains why delays are common, and why a payment plan tied to a date rather than to a milestone deserves suspicion.

Permits and zoning

• The land: who owns it, whether it is mortgaged, whether the title is clean, and whether the land-use category allows tourist accommodation or hotel use. A residential zoning for a building marketed as a hotel is a serious problem.
• The building permit: ask for the permit number and check that it covers the number of units, the height and the area being sold, and that it has not expired.
• Environmental and planning approvals where required, especially near the coast or protected land.
• The tourism licence route: hotel licence, classification, registration as tourist accommodation. In some markets units can be let short term only inside zones designated for tourism, and licences can be withdrawn or capped.
• Rules on foreign ownership of the unit or the land. These differ sharply between markets; see our guides on property due diligence in Thailand and foreign property ownership in Zanzibar for two examples of how leaseholds and approvals change what you actually hold.

Ask for copies and have a local lawyer check them against the public registry, not against the sales gallery. A project that cannot show these documents on request is telling you something.

Where your instalments go

The most important structural protection in off-plan buying is where the money sits until the building exists. The rules differ by country, so treat the following as a headline map to verify locally.

• Dubai: Law No. 8 of 2007 requires a project-specific escrow account for off-plan developments. Buyers' payments go into it, and the developer can draw funds only in stages tied to construction progress, under the supervision of the Land Department and approved trustee banks. Our Dubai checklist shows how to verify the account.
• Spain: the first additional provision of Law 38/1999 (as amended by Law 20/2015) says that a developer who takes money on account of the price during construction must, from the grant of the building licence, guarantee its return with interest by an insurance bond or a bank guarantee and receive the money into a special account. The provision is written for homes. Whether a hotel-operated or tourist unit counts as a home for this purpose is a question for a Spanish lawyer, and buyers have lost money in the past where a contract mentioned a guarantee that was never issued.
• Dominican Republic: structured projects use a trust under Law 189-11, so that payments go to a trustee rather than to the developer; see our Dominican Republic checklist.
• Many other markets have no mandatory protection, and instalments can go straight to the developer's own account. Your protection is then only the contract and the developer's solvency.

In every market, pay only into the account named in the contract, in the developer's or the escrow agent's name, never into a personal account, and keep the evidence.

Is an operator signed?

A render with a famous logo is not an operating contract. Ask whether a management or franchise agreement has been signed, with whom, on what date, for what term, and whether it is conditional on something that has not yet happened (financing, a licence, a minimum number of sold units). Ask whether the operator can withdraw before opening, and what happens to your unit if it does: a project sold as branded that opens unbranded is a different product. Ask also who the operator's contract is with. It is normally with the developer or the owners' association, not with you, which affects what you can enforce. Our guides on choosing an operator and reading the contract and on management agreements, leases and franchises go into the clauses.

How the project is financed

A developer finances construction from three sources: its own equity, the instalments of buyers and a bank loan. A project that depends on buyers' instalments to build is exposed to its own sales pace: if sales slow, construction slows. Ask what share of units is sold, whether a construction loan is in place and from whom, who holds security over the land, and how the bank's claim ranks against yours if the developer fails. Ask whether the developer has built a hotel before, or only apartments. Our guide on hotel acquisition financing for foreign buyers explains the lender's side.

Completion record and delays

The best predictor of delivery is delivery. Ask for the list of the developer's completed projects, visit at least one hotel it has opened, and compare the promised and actual dates. Check the date in the website, the brochure and the draft contract; if they differ, ask for an explanation in writing, because completion dates in marketing often move. Look at the early marketing material of an older project and see how many months it slipped. Speak to owners you find yourself, not those the seller introduces.

Payment plan and contract clauses

• The definition of completion: shell and core, fitted out, furnished, or open and operating. These can be years apart.
• A long-stop date and what follows if it is missed: compensation for delay, and your right to cancel and receive a refund with interest, and how fast.
• Your right to withdraw if the operator or the brand changes, or if the specification or the unit's size changes.
• Instalments tied to verified construction milestones, not to calendar dates alone.
• Rules for resale before completion: whether you may assign the contract, with what consent and what fee.
• Currency, taxes and fees: who pays what at transfer.
• Governing law and where disputes are heard, and whether arbitration is binding.

Independent lawyer and documents

Use a lawyer who is not the developer's. Ask them to check the title, the permits, the escrow or guarantee arrangements, the sale contract and the operator agreement, and to tell you in writing what they could not verify. Give a power of attorney only for a defined purpose and a short period. Keep proof of every payment.

Site visit checklist

• Is there construction activity that matches the stage the payment plan assumes? Ask for dated progress photographs and compare them with what you see.
• Is the permit board on site, with the same number as in the documents?
• What is around the site: access roads, utilities, neighbouring plots, noise, flooding?
• Is there an existing hotel from the same developer that you can inspect, and what do independent reviews and the owners you meet say about it?
• Does the show unit match the specification in the contract?

At hand-over

Check the snagging list, the occupancy or completion permit, the registration of your title, the operating licence and the date the operator starts, and ask for the first service-charge statement.

FAQ

Is escrow always required? No: it depends on the country, and in some markets nothing is mandatory. Is a signed brand name enough? No: check the contract, its term and its conditions. Should I buy off plan at all? For many buyers a completed, operating hotel unit with several years of statements is easier to assess; the choice between building and operating assets is explained in buying an operating hotel versus a building to convert.

How we help

We read the documents with you, check the developer's record where it is public and say plainly what is missing, before you commit. See hotels in our catalogue for what we currently list. Informational only, not legal, tax or investment advice; figures are indicative and change over time.