Reasons to Prefer Hotel Room Investment

The first thing that comes to mind when you consider property investment options is buying an apartment or a house. Although such a purchase is still a good way to protect your money from devaluation, one can hardly expect considerable income from renting it out since such an estate isn’t deliberately designed for commercial use. But a hotel is another story! In comparison to residential property, hotel room investment has a number of benefits which may attract those interested in making money.

Price Issue

Many people believe that hotel property investment is a totally another level and isn’t designed for ‘ordinary mortals’. When it comes to buying the whole building and hiring staff, it is true. But in fact, anyone with enough savings can buy one hotel room and rent it out. It is a common scheme when you own but not manage your property. Besides, the price of a hotel room may not differ that much from the cost of an apartment – it largely depends on the location though.

Resorts vs. Residential Areas

The main difference between investing in a residential object and a hotel room is that an apartment is rented out for a long period, while a hotel room – every few days. Resort areas are heavily populated with tourists and visitors who need a roof over their heads as well as decent service – and that is exactly what a hotel is designed for! Tourists are ready to pay and even overpay while a tenant is always looking for a cheaper option. Of course, it doesn’t mean that tourists never compare prices, but due to the large number of potential customers, it is easier to find someone willing to occupy the room.

Professional Operator

When you wish to purchase an apartment, you usually look for one in your own town since you can’t always move to another city to take care of the problems that may arise. In case of hotel room investment, this would be inevitable. But, fortunately, all management is done by the operator company.

Such firms hire industry professionals who know very well how to attract customers, provide them with high-level service, and convince them to check in again. If you own a room in a hotel, the operator pays you for renting it. The payment may be either regular but not so high (about 4 per cent of the room’s purchase price a year) or depend on the hotel’s performance (which may be riskier but with higher yields).

In any case, you don’t have to manage your property all by yourself which is especially useful when you invest in foreign real estate markets.

Flexibility

Another advantage of hotel room investment also derives from management company’s skills. An average house or apartment owner is very limited when it comes to making deals. Basically, you can only offer a discount and nothing more. A hotel is much more flexible. Along with discounts, it can choose from all sorts of promotions and advertizing. During crisis periods, it can cut down expenses on the staff or products it orders, it can change the supplier or even quickly switch to another clientele (visitors from other countries) which is unavailable for an apartment owner.

Room vs. Mini Hotels

Amateur investors are often tempted to buy mini hotels as they believe that such property will guarantee stable and high enough income. But the facts show that attracting guests is much more difficult than keeping the service at a high level. Sooner or later such investors try to hire a managing company, but those are rarely interested in properties with less than 100 hotel rooms. So if you have enough money and want higher income, it is wiser to diversify your investment through purchasing hotel rooms in different areas. For example, one or two in a business centre in Europe, another one in the USA, a couple of rooms in emerging markets (Dubai’s your best choice here as it offers considerable yields and low taxes), etc.