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THE REALITY OF REAL ESTATE HOTEL INVESTMENT If considered carefully, investing in hotel real estate can be a profitable endeavor. Christian Salloum, managing director of BrandPortunity Hospitality Consultancy, takes a closer look at the different types of investment and how to get the ball rolling.
Over the past decade, investments in rooms and hotels have been changing. Individual investors are buying rooms, while hotel operators are venturing into purchasing potential hotel buildings.
Select-service hotels
Key data to consider
This category includes hotels such as Aloft, Hilton Garden Inn and Hotel Indigo. They combine a mix of full- and limited-service hotel offerings
- Average Daily Rate (ADR) – divide room rate by rooms sold over a select period
What is hotel real estate?
Limited-service hotels
Hotels are different from all other types of property. They are operationally complex and depend on nightly rentals compared to short- or long-term lease. Hotels are highly responsive to changes in the market, such as low and high seasons. This flexibility meant that the industry faced massive disruptions during the pandemic.
These properties don't offer any restaurant or banquet facilities. Some offer amenities, such as a swimming pool or fitness center. Examples include Comfort Inn and Hampton Inn.
Types of hotel investment Hotels are categorized according to their service offerings and amenities.
Full-service hotels Full-service hotels offer accommodation, retail, spas, event spaces, restaurants, bars, room service and sporting facilities. They rely on large numbers of staff and include world-famous chains, such as Hilton, Marriott, IHG and Accord.
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HOSPITALITY NEWS ME | AUG-SEP 2022
Extended-stay hotels Embassy Suites, Staybridge and Hiltons' Homewood Suites are great examples of extended-stay hotels. Providing temporary suite-style rooms with at-home features, such as a kitchenette and laundry facilities, this property type largely caters to families who are relocating and business travelers on long-term projects.
Budget hotels Hotels such as Days Inn and Ibis Hotels keep their costs to a minimum by providing limited amenities, services and assistance.
- Revenue Per Available Room (RevPAR) – total room revenue divided by the number of available rooms It is essential for hotel owners and operators to understand the offered in daily, weekly, monthly and annual RevPAR trends. Comparing competitors’ RevPAR hotels to accurate performance analysis is also beneficial.
Key elements to success There are two main types of tourism: leisure and business. Business travel tends to occur on weekdays, while tourists drive demand at weekends and during the holiday season. To run a hotel business, operators or hotel owners should recognize the factors that lead to success. An optimal business mix in any specific market is fundamental. Seasonal demand is commonplace for ski and beach
