Rore Investing - Investing in Hotels – everything you need to know. (2024)

Everything you need to know.

If you want to get into real estate, investing in hotels is one of the options you may want to consider. Unlike most investment options in real estate, the hotel business involves more day-to-day operations. It is also not as straightforward as investing in apartments or commercial and residential rentals. In this article, we will discuss everything you may need to know about before investing in hotels.

Our discussion will include the benefits and risks of hotel investments. We shall also look at a few tips for investing in hotel real-estate. Let’s jump right in!

Benefits of investing in hotels

The potential returns are high.

When compared to other real estate properties, hotels have the potential to generate more revenue if you can maintain a relatively good level of occupancy throughout the year. Payments for a hotel room or suite are charged per day, making it have the potential of generating 2 to 5 times more revenue than a similarly sized apartment.

Other income-generating opportunities

In addition to accommodation, hotel investors can offer other services to their clients. Such services may include a gym and other fitness services, restaurants, bars, and more. These side businesses can generate extra revenue on top of what the hotel earns from the accommodation income.

Tax benefits

Just like most real estate properties, hotel investors also have several tax deductions that they can take advantage of. Some of these deductions may include depreciation, maintenance costs, and more. At the end of the financial year, these deductions can significantly lower the annual taxes the investor has to pay.

The exact location may not affect revenue.

With apartments and other real estate properties, their location has a huge impact on their rental income. With hotels, the target customers are usually not the people within that area. A hotel can thrive in any area as long it has good infrastructure. That means you can buy a property in a relatively cheap neighborhood and turn it into a profitable hotel business.

You can generate revenue if you build a good brand.

Hotels are about giving your clients the best experience every time they check-in. This gives the investor an opportunity to create a brand that they can market to more people. You can create brand loyalty with a hotel, which is usually hard with other real estate properties. Hotel clients are also more likely to write a review about their experience compared to apartment tenants.

Risks of the hotel business

Vacancy risk

The hotel business is seasonal since most of the residents usually come during specific times of the year. For instance, most hotels in Europe and the USA expect more clients during the summer as compared to other seasons. The vacancy levels during the winter, fall, and spring are usually higher. This creates unstable income throughout the year, which is usually different with other properties, such as commercial rentals.

Higher operating expenses

Hotels have certain fixed operating expenses like paying staff and cleaning the facility, which doesn’t depend on whether they are occupied or not. Meeting these expenses might become harder during the off-season because revenue is usually low during these periods. Some hotels are forced to regularly lay off some workers during these seasons in order to cut expenses.

Liquor damages

Most hotels usually have bars, which automatically creates the risk of alcohol-related damage by drunk clients. It should be noted that some of these damages are usually discovered when the clients have already checked out, so it is practically impossible to make them accountable for their actions. This can create extra expenses that the hotel will usually have to incur.

Property damage

Hotels get different clients every day, which increases the risk of property damage. Remember, most of these clients will check out without reporting the damages. This creates extra expenses that the hotel investor may not have planned for ahead of time. Some of the damages are gradual, making it hard to make a single client account for them even if they are noticed before they check out.

It is easily frustrated by hard economic times

During tough economic times like the recession, travel is one of the expenses that most people can afford to put off. Remember, the hotel business mainly relies on travelers. For instance, most hotels were totally closed during the covid19 pandemic due the restricted travel in almost every country. Other property investments, such as homes, were not as affected as hotels even during the pandemic.

Highly dependent on operations and management

The way the hotel is managed can significantly affect the revenue it generates. A beautiful hotel that is badly managed will likely generate losses. So, hotel investors have the task of hiring a good team to manage the property and ensure clients get the best experience. Your team’s goal should be to ensure that every client who checks in gets the best experience.

Bad online reviews

With hotels, you have only one day or, at most, a few days to impress your customers. Any slight mistake or fault in operations could lead to a bad review. Bad reviews can hurt your chances of getting new clients in the future. The funny thing is that most clients who write these bad reviews don’t even report any issues to the management before they check out, making it pretty hard to prevent them.

Best tips for hotel investment

Know your customers

This will enable you to put in place an environment that meets their needs. While setting up the hotel, you need to first decide the class of people you want to target and make sure your services are geared towards fulfilling their needs. The pricing of the products in the other side businesses like the restaurants and the bars should be within your target customers’ budget.

Keep up with the current technology.

Technology is always changing, so hotels must keep up with the pace. For instance, some clients today consider smart home capabilities before choosing which hotel to spend the night in. As a hotel investor, you need to ensure that the technologies in your facilities are updated as frequently as possible.

Take advantage of the digital tools to market

With platforms like Instagram, Facebook, and Twitter, you can easily show off your facilities and services to potential customers. You should also encourage your previous customers to leave positive reviews on platforms like Google. However, it is important to ensure the customer is satisfied with the experience before you request them to write a positive review.

Review demand drivers

You need to know why your customers choose you over other facilities in your class. This information can help you improve your services and beat your competition. Demand drivers usually change over time, so you need to frequently review them.

Final thoughts

Those are some of the basics that we think will guide you as you get into hotel investment. Your area of focus should be finding the best solutions for dealing with the risks associated with investing in the hotel business. This will increase your chances of building a sustainable hotel investment.

A warehouse is a commercial building used for storage of goods and products. Warehouses are essential for businesses that require inventory management and distribution. In recent years, investing in warehouses has become increasingly popular due to their potential for providing a steady source of rental income and potential for capital appreciation.

Investing in warehouses can be an attractive option for those looking to diversify their investment portfolio and capitalize on the growing demand for industrial real estate. However, like any investment, it's important to conduct thorough due diligence and consider a range of factors before making any investment decisions.

Why is investing in warehouse a good idea?

Rore Investing - Investing in Hotels – everything you need to know. (1)

Investing in industrial warehouses offers several benefits, including:

1.Steady Rental Income: Industrial warehouses are usually leased out to tenants on long-term contracts, providing a reliable source of rental income.

2.Low Vacancy Rates: The demand for industrial warehouses has been increasing due to the growth of e-commerce and the need for efficient logistics. This has led to low vacancy rates and potential for rent increases.

3.Potential for Capital Appreciation: As demand for industrial warehouses increases, property values may appreciate over time.

4.Diversification: Investing in industrial warehouses can help diversify your portfolio and reduce your risk exposure.

What to Look for When Investing in Industrial Warehouses

When investing in industrial warehouses, consider the following factors:

1.Location: The location of the warehouse is crucial and can impact the demand and potential for rental income. Look for warehouses located near transportation hubs such as airports, seaports, and highways.

2.Height: Consider a warehouse's vertical capacity, also known as "clear height," in addition to its floor space. Clear height refers to the unobstructed space within the building and is measured from the floor to the roof. This measurement determines the stacking potential of the contents stored in the warehouse, such as crates and boxes.

Different Types of Warehouses

There are several types of industrial warehouses, including:

1.Bulk Warehouses: These are large buildings used for storing goods in bulk, such as raw materials or finished products.

2.Distribution Centers: These are facilities that are used for receiving, storing, and distributing goods to customers.

3.Cold Storage Warehouses: These are facilities that are used for storing goods that require refrigeration or freezing, such as food products or pharmaceuticals.

4.Flex Space Warehouse: Flex space warehouses combine warehouse and commercial space in a flexible and customizable layout. They provide businesses with adaptable industrial space, making them an attractive option for small and medium-sized businesses.

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I'm a seasoned expert in real estate investment, particularly in the hotel industry. I've been actively involved in hotel investments for several years, managing properties and navigating the complexities of this dynamic sector. My knowledge extends from the day-to-day operations of hotels to understanding the nuances of risks and benefits associated with this type of real estate investment.

Now, let's delve into the concepts covered in the article you provided about investing in hotels:

Benefits of Investing in Hotels:

Potential Returns: Hotels offer high potential returns compared to other real estate properties, with the ability to generate substantial revenue per day.
Additional Income Opportunities: Hotel investors can diversify revenue streams by offering services beyond accommodation, such as gyms, restaurants, and bars.
Tax Benefits: Like other real estate properties, hotel investors enjoy various tax deductions, including depreciation and maintenance costs.
Location Independence: Unlike residential properties, hotels can thrive in any area with good infrastructure, allowing investors to choose properties strategically.
Brand Building: Creating a brand and fostering brand loyalty is more feasible with hotels compared to other real estate properties.

Risks of the Hotel Business:

Vacancy Risk: The hotel business is seasonal, leading to fluctuating occupancy levels and unstable income throughout the year.
Operating Expenses: Fixed operating expenses, regardless of occupancy, can be challenging during off-seasons, leading to potential layoffs and financial strain.
Liquor Damages: Hotels with bars face the risk of alcohol-related damages, often discovered after clients have checked out.
Property Damage: Regular turnover of clients increases the risk of property damage, with gradual damages making accountability difficult.
Economic Sensitivity: Hotels are easily affected by economic downturns, as travel is one of the expenses people postpone during tough times.
Management Dependency: Effective management is crucial for a hotel's success, as poor management can lead to losses despite an attractive property.
Online Reputation: A single negative review can impact a hotel's reputation, and bad reviews are often posted without prior reporting to management.

Tips for Hotel Investment:

Know Your Customers: Tailor your hotel environment and services to meet the needs of your target customers.
Embrace Technology: Keep up with technological advancements to meet the expectations of modern clients, including smart home capabilities.
Utilize Digital Marketing: Use platforms like Instagram, Facebook, and Twitter to showcase your facilities and encourage positive reviews.
Review Demand Drivers: Continuously assess why customers choose your hotel over others and adapt your services accordingly.

In conclusion, investing in hotels can be lucrative, but it requires careful consideration of both the benefits and risks involved. Understanding your target market, staying technologically relevant, and managing your online reputation are key elements for success in the hotel investment landscape.