If you would like to invest in a hotel and are doing your research, at XOTELS, a company specialised in Hotel Asset Management, we would like to share some giveaways and a list of Top 10 tips to make wise decisions when investing in a hotel.
1. Research the company
Before making any financial decisions, we advise you to do thorough research. It is essential to be up-to-date about the hotel you are considering as an investment. Some businesses are not as productive and profitable as they seem at first. They might lack popularity due to incorrect marketing or positioning. To assure a good investment, getting to know the brand as well as possible, before making any financial commitments, is crucial.
Taking the surrounding area of a hotel into account is essential. If a shopping mall, touristic attraction or station is being built in the area, chances are that the hotel’s demand increases considerably. Neighborhoods that are currently rising in popularity are great locations to invest in as well. These investments are often affordable, and their value is expected to increase rapidly.
3. Consider the proximity
Although it might sound inviting to invest in a hotel at a holiday destination, be sure to analyse local hotels and accommodations as well. You never know if a hotel in your own city or country might offer the ideal investment opportunity.
Hotel Investment Tips for hotels
4. Identify the operator
When choosing where to invest, keep in mind that the generation of your earnings is the responsibility of the hotel operator. Identify which operator will be managing your income and make sure you are both on the same page.
5. Establish a realistic budget
Taking into account how much you plan to invest, especially if you’re borrowing, is paramount when considering any investment. Once you established a realistic budget, make sure you have measured all limits. If it’s not adding up, it’s time to consider a different game plan.
6. Remember the risks
There is no such thing as a risk-free investment. Understand that hotels sometimes experience downturns and that there is always a chance for this to happen. Returns to investors can definitely be delayed when the hotel is still in the process of trying to reach its ideal occupancy rate. Always keep in mind that it is a normal occurrence for returns to be smaller or even delayed from the expectations.
7. Read between the lines
This should be obvious but we’re going to mention it once again: read the entire contract. Terms and conditions differ for each circumstance when it comes to the earnings of investors, so be sure to read the contract details carefully. It’s better to be safe than sorry.
8. Check for guarantees
Guaranteed returns are not always the case when investing in hotels. When negotiating your contract, take the percentage you need to receive in order to make your investment worth it into account. Opting for a hotel that comes with a guarantee might be more suitable for your needs.
9. Keep an eye out for bonuses
Some hotels offer their investors deals such as a set number of days or weeks that they can stay at the hotel for free or perhaps receive discounts at facilities. So take this into account when considering which hotel to invest in.
10. Consider the environment
Investing in a company with corporate social responsibility is ideal. Being socially accountable in aspects like the environment is rising in importance. Environmental awareness and the trend of being eco-friendly keeps growing. The hospitality industry has a remarkable impact on the environment, so look into your potential investment’s policies towards for example the frequency of fabric washing and recycling of used products like bathroom amenities.
A final word: Investing in a Hotel
Becoming an investor in a hotel is definitely a smart economic path. It is an excellent way to generate income in the long run, and to become a part of a business. However, always know exactly what you are getting into by researching and having a closer look at the kind of hotel you are joining.
Looking to invest yourself? Find your next property investment opportunity here.