Hotel investment is fast becoming one of the most popular ways to diversify an asset portfolio. It is being used as an exciting new alternative to the traditional buy-to-let residential market and means investors can enjoy a ‘hands off’ investment while a professional hotel management company does all the hard work for them. These industry experts are incentivised to maximise occupancy levels and room rates to generate the best possible yield for the investor.
However, securing such an investment can sometimes prove difficult as there are so many potential units to choose from. In recent years, the budget rooms and business sector rooms have remained at the top of buyers’ wish lists but, as with most property-related investments, to ensure you get good returns, the key lies in the location.
If you’re considering adding a few hotel investments to your asset portfolio, be sure to seek out well known brands - well established hotels spell high quality (especially if they possess a five star rating) and boast global recognition thanks to international marketing campaigns. Many of these well known brands have long standing relationships with world renowned sporting personalities and sporting brands, particularly in the golfing world, which can attract guests and help to get the money flowing in.
By selecting hotels which offer excellent facilities (stunning views, spas, fitness centres, pools, restaurants or a PGA championship golf course, for example) or are positioned next to business and exhibition centres, you will find it easier to make a good profit. The moderate price range of business hotel rooms can generate net yields of around 6 – 8%, which professional hotel investment companies will help to achieve.
Once you’ve secured a hotel room investment, it can provide a great income, often one which is cash positive from the first year, even if fully mortgaged. As well as being incredibly tax efficient and hands off, hotel room investments can also offer lifestyle benefits, especially if the hotel you have chosen is located in a luxurious holiday destination. Free personal usage is often included in the investment (however this is strictly forbidden if you have purchased via a pension).
Most hotel rooms come fully furnished. All furnishing are normally maintained, repaired and changed by the operator out of their share of the income. Investors will usually receive quarterly accounts displaying the hotel investment funds generated by their room. They are offered either on a long term leasehold basis or often, the room is pooled for the whole hotel or a specific standard of room – this is sometimes referred to as a collective investment scheme. Alternatively, the rooms are rented out on an automatic rotation basis. This is to ensure a fair income is distributed.
*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.