Hotel & Hospitality

As a Hotel Owner Operator or a Hotel Investor, you will not want to overlook the investment opportunities or strategies that we have designed. Let us partner with you to demonstrate how to increase an average performing hotel investment by 25% or assist you in the highest RevPar potential.

Investing in hotel rooms makes hotel investment accessible to the masses. The hotel industry is one of the biggest and fastest growing industries in the world; all the smart global funds and large investment companies are increasing their exposure to hotels; there are even hotel investment funds. Investing in hotel rooms is an excellent and profitable alternative to the traditional buy-to-let investment, allowing property investors to invest in the commercial sector at an affordable and accessible level, providing diversification for their property portfolio. Many private investors don’t like investing in funds, they like to keep control of their own investments, but short of buying a hotel they are stumped. Now, they can invest with confidence.
Investors receive either room revenue split between the investor and the hotel operator, or, a split of the net income accrued from all of the areas of the guest spend attributed to the room, including food and beverage, conferencing and entertainment. The hotel operator is therefore incentivised to maximise occupancy and room rates, benefiting both the operator and the investor.

Hotel projects are on occasion sold with a rental guarantee period, which can be a fixed guarantee or a minimum return guarantee, meaning that if the hotel performs better than expected, the investor will receive an increased return. This ensures that the investor receives a good yield from their investment whilst the hotel is launched and established in the market.

Certain hotel projects have a defined and sometimes guaranteed exit strategy, where the hotel room can be sold back to the developer within a fixed period. For projects without a defined exit strategy, we provide a re-sale service, where we can market and sell your hotel room to our world-wide investor base. Many hotel investments seal the deal with a guaranteed buyback offer. This stipulates that the hotel owner or investment management company will buy back your hotel room after a given period for a contracted amount. This is usually 125-150 percent of the purchase price, and in the best deals the buy back is optional; you can either stay on as the owner or sell on the open market.

Hotel rooms typically are of a leasehold tenure, similar to a residential apartment, therefore investors have the security of ownership of the property, as they would do from a traditional buy-to-let investment property.

Financing a hotel or motel is like financing any other commercial property. Lenders will take the usual things into consideration such as operating costs and income, as well as the overall condition of the property. Underwriters will also consider expected future growth and the overall risk of the investment (think back to market cap rates). Expect a lender to loan a maximum of 70 percent of the sales price, so you’ll need the other 30 percent either from a down payment or through owner-financing.

With almost any commercial real estate venture, an investor needs to identify how involved they’d like to be in the management of the property, and in the case with hotels, the daily operations of the business. There are a myriad of different management structures you can establish, and the larger the operation, the more complex these decisions will become. Room cleaning and laundry, building and grounds maintenance, restaurant operations, etc. are all on the table when it comes to who and how those operations will be managed.

When investing in smaller hotels/motels, a “hands-on” investor might choose to live on-site and participate in the day to day operations – or they may take a more passive approach, and hire someone to live in the manager’s suite rent-free with a modest salary and let them handle the daily management responsibilities – small motel owners often look for semi-retired couples for this role.

There are also opportunities to convert small to mid-size private operations to more well-known franchises such as Motel 6 or Best Western – thereby reaping the rewards of its corporate support, training and national advertising campaigns.

With larger operations, one popular route is to enlist the assistance of a hotel management and consulting company such as Aramark and Marcus Corporation. These firms bring solid experience and expertise in everything from vending machine services to operating full-service catering and convention facilities. Additionally, they can often manage these additional services independently of other hotel operations providing you the opportunity to manage the areas you feel comfortable with and eliminating the hassle of the remaining operational areas.