Entrepreneurs around the world were aware of the potential, economic opportunity, purpose, growing markets and prestige of hotel investment hundred years ago. Not too much has changed nowadays. According to the real estate investor and developer, Adam Hochfelder, there are some other reasons for investing in hotels, besides the potential high financial gains.
Below, he points out some of these.
Asset Diversification
Although it is not a direct financial reason for hotel investment, diversification is important.
The performance of the hotel assets is not correlated with share market indexes. Many investors, such as Hochfelder, demand risk reduction and practice risk management across their portfolios using real estate, including hotels. This is a protection based reason for hotel investment.
Capital Protection
Buying hotel as real estate investment allows a fast and substantial deployment of your capital. Hotel asset values can be typically pushed into high 7, 8 and even 9 figure sums. Furthermore, you can instantly shift the market and raise prices by investing these figures in share transactions. Owners can also protect themselves via currency diversification.
Investment Control
Normally, decision-making control of the assets is demanded by hoteliers. That control can be acquired at least normally, when investing in shares or managed funds.
According to the highly experienced real estate executive, Hochfelder, An advantageous reason for hotel ownership is holding day-to-day control and accountability, especially for independent hoteliers and family run properties, because it adds ‘asset accountability’.
Playing the Game
Some people, such as many stock brokers and day-traders love the thrill of the chase and the game of business.
The rush of pursuing deals, chasing hotel development options and achieving returns (especially in top-tier aspirationnal locations) is a different reason for hotel investment.
For some hoteliers, including Hochfelder, daily operations prove equally exciting.
Prestige Factors
This is the egocentric reason for investing in hotels. A popular type of assets among the high net worth individuals, are the international trophy assets.
These individuals are willing to pay supreme prices for prestigious hotels in landmark ‘high barrier to entry’ locations.
Family Heirlooms
Same as other asset classes, independent hotels across the world are run by small family businesses. In almost 100% of the cases, the hotel will remain in the family. Keeping the asset may be an emotional reason for hotel investment. However, ROI and other factors likely exist.
Reasons for Hotel Investment: Final Word
If you are considering investing in hotels or resorts, Hochfelder (follow him on Twitter) suggests thinking about buying your reason for hotel investment, and creating your plan in accordance with it. When you know your reason for hotel ownership, they will drive your business plan, decision making, holding period objectives, hotel branding decisions and more.
