How to be a Savvy Hotel Investor
With this year’s pandemic throwing the stock market into complete disarray with little predictability, it can be challenging to know what will be a good investment or not. Hotels may seem risky because of the lack of travel with stay-at-home orders and lockdowns. However, the travel industry is set to boom post-pandemic because of everyone being housebound for so long. Also, take into consideration that the hotel market has consistently grown for the past ten years pre-pandemic.
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However, there are some real considerations any savvy hotel investor should have if they decide to invest in the hospitality service.
- Decipher who you are getting into bed with. Brand VS Non-Branded Hotels.
Know how to decide brand name verse non-brand hotels by understanding the following.
- Brand names offer increased accessibility to marketing. If you are not someone who has a robust marketing reach, brand names already have this put together. This means less worry about “selling” your hotel to customers.
- Independent hotels will give you a little bit more breathing room to operate. This means that in challenging times (coronavirus), you can control the financial situation. This may mean cutting costs to save money or ensuring you don’t cut employees because that means something to you
- Consider who the target audience is for the hotel and if it works.
Understand that hotels are built based on the customer
- Scope out the area and make sure it matches with the guaranteed target who will stay there. For instance, is it close to the airport for travelers? Is it family-friendly if positioned in Disney? What kind of amenities does it offer, like a pool and gym for those traveling? These will determine the success of selling out nights.
- Brand names have advantages. Brand names have successful reputations built-in. Marriott, Hilton, etc. deliver a specific service that customers expect when they arrive. This means that because of brand loyalty a frequent traveler will more often than not stay with a brand name than an independent. The exception to this is boutique hotels in touristy towns that off an exclusive and individual experience.
- Understand that management of the hotel you’re invested in is a make or break.
Putting together successful management is key to success in your investment. A clear operation of how things are run is imperative.
- The first place to look when it comes to determining the success of a hotel management company is the turnover of employees at the hotel you wish to invest in. Low turnover typically translates to happy employees and good culture. This directly positively impacts the consumer experience. The more familiar an employee is with the system the better service they can give.
- Operational efficiency is your other significant factor. How is the money being spent? If there is a good cash flow, that is usually an indicator that the money is going to the right places. Low efficiency looks like wasted money in ineffective marketing, high operating costs, and more.
The listed above are the basic principles one must follow to understand what makes a good investment and what doesn’t.
With this year’s pandemic throwing the stock market into complete disarray with little predictability, it can be challenging to know what will be a good investment or not. Hotels may seem risky because of the lack of travel with stay-at-home orders and lockdowns. However, the travel industry is set to boom post-pandemic because of everyone being housebound for so long. Also, take into consideration that the hotel market has consistently grown for the past ten years pre-pandemic.
However, there are some real considerations any savvy hotel investor should have if they decide to invest in the hospitality service.
- Decipher who you are getting into bed with. Brand VS Non-Branded Hotels.
Know how to decide brand name verse non-brand hotels by understanding the following.
- Brand names offer increased accessibility to marketing. If you are not someone who has a robust marketing reach, brand names already have this put together. This means less worry about “selling” your hotel to customers.
- Independent hotels will give you a little bit more breathing room to operate. This means that in challenging times (coronavirus), you can control the financial situation. This may mean cutting costs to save money or ensuring you don’t cut employees because that means something to you
- Consider who the target audience is for the hotel and if it works.
Understand that hotels are built based on the customer
- Scope out the area and make sure it matches with the guaranteed target who will stay there. For instance, is it close to the airport for travelers? Is it family-friendly if positioned in Disney? What kind of amenities does it offer, like a pool and gym for those traveling? These will determine the success of selling out nights.
- Brand names have advantages. Brand names have successful reputations built-in. Marriott, Hilton, etc. deliver a specific service that customers expect when they arrive. This means that because of brand loyalty a frequent traveler will more often than not stay with a brand name than an independent. The exception to this is boutique hotels in touristy towns that off an exclusive and individual experience.
- Understand that management of the hotel you’re invested in is a make or break.
Putting together successful management is key to success in your investment. A clear operation of how things are run is imperative.
- The first place to look when it comes to determining the success of a hotel management company is the turnover of employees at the hotel you wish to invest in. Low turnover typically translates to happy employees and good culture. This directly positively impacts the consumer experience. The more familiar an employee is with the system the better service they can give.
- Operational efficiency is your other significant factor. How is the money being spent? If there is a good cash flow, that is usually an indicator that the money is going to the right places. Low efficiency looks like wasted money in ineffective marketing, high operating costs, and more.
Hi! We’re Josh and Jolene Baijot, the creators of this website. We’re also Commercial Real Estate Agents in Washington State. Thank you for taking the time to read this blog post. We appreciate your time spent on this site. You can connect with us on Facebook, Instagram, or contact us through this website.
