Real estate investing can be an incredibly rewarding experience. There are a plethora of different types of properties to invest in. It’s important to do your research and be fully prepared before making a commitment with your money. This is especially true if you have been considering an investment within the hospitality and travel markets. The structure of revenue and the market demand for hotel properties, specifically, can vary greatly from other investments.
Here’s what to know before investing in hotel real estate.
Invest in Mixed-Use Buildings
More than solely a hotel, mixed-use buildings have great potential. Spaces that offer things to do nearby are seen by people as a bonus. When people travel, factors such as bad weather or tired children can keep them close to the hotel that they’re staying at. Hotels that have mixed-use space can include things such as restaurants and spas. In some cases, there can even be performing arts centers or small water parks. Have an understanding of the local market so that you can be open to both franchise and independent hotels that are offering these types of spaces.
Understand Your Competition and the Economy
It’s a no brainer that you should have a clear understanding of the economy when investing. Be aware of the market and find out how many local vacation rentals are available in the area. Furthermore, apps such as Airbnb have changed the way that people book places to stay while traveling. Hotel investments depend heavily on the tourism industry so understand who the competition is.
It is vital to the success of your investment that you pay attention to the existing management at a hotel. It is a particularly important factor if you don’t have any personal experience in operating a hotel. Reach an agreement that covers everything that keeps the hotel’s occupancy growing and everything operating smoothly. The right management team can fulfill your investment goals and help the value of the property continue to grow as well.
Room Occupancy Rates
Make sure that you are speaking with professionals who are already familiar with hotel real estate. As you continue to look at the existing market and demand use resources such as tourist bureaus and Chambers of Commerce to help you learn about average occupancy rates in the area. If you want to be able to predict the kind of return you’ll get on your investment then make sure that you’re looking at average daily rates for rooms similar to the hotel that you’re considering investing in. Doing so can also help you to determine amenities and make other decisions.