Hotel rooms as an investment are a relatively new concept, in the last twenty years or so opportunities have arisen for investors to add this investment type to their portfolios. The concept originated in the United States of America and now hotel investment options are available around the world.
In the current market climate it makes perfect sense for a developer that wants to build a hotel but is unable to get finance from a bank. In theory, the investor is paid a share of the income the room generates and does not have to do anything – a completely ‘hands-free’ investment. That does not mean it will be a completely stress-free investment however, as any economic downturn will obviously affect occupancy rates and eventually your return.
So what are the factors that affect the success of a hotel investment?
Location is an important factor in the success of the hotel; it will need to attract domestic and overseas visitors and the development will need to be close to transport links, as well as local attractions.
Features of the hotel that will increase the success of investments are experienced hotel management companies with good customer service, facilities such as pools, spas, golf courses etc. and a good marketing team either in the hotel or hired by the hotel. High quality standards and customer care will increase re-visits and therefore yield from the investment.
Possibly the most important factor to look for in the hotel management company is its media presence. So many hotel rooms are booked online now as it is vital for the management company to have a hefty online connection through the major travel booking engines. Ensuring that a first rate management team is running the hotel will increase the amount of visitors and the reputation of the hotel.
Another aspect to affect the success of the hotel is tourism. Attractions in the locality of the hotel will affect occupancy rates; investors should research the local tourism and the efforts in increasing tourism to the surrounding area. In the case of city centre hotels near conference facilities (Central London, UK, or Cannes, France) provided the hotel is within easy reach of the facilities, bookings can be expected to be consistent without so much reliance on tourism.
Traditionally hotel income and occupancy rates follow the ebb and flow of the economy so, as the economic climate improves, the hotel industry will follow. By investing in Buy to Let hotel rooms, investors will be looking to the future. When choosing hotel rooms as an investment the investor will need to remain aware that in most cases, hotel room investments really should be viewed as a long term hold to reap the best returns.