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Pros and Cons of Hotel Investments

Real estate investment is an undertaking, and a difficult one to be sure. One of the difficulties lies in which kind of property you choose to invest in. While commercial real estate comes with its own challenges, so do private residences and buy-to-let.

Pros and Cons of Hotel Investments

Monday January 21, 2019,

3 min Read

Pros and Cons of Hotel Investments


Real estate investment is an undertaking, and a difficult one to be sure. One of the difficulties lies in which kind of property you choose to invest in. While commercial real estate comes with its own challenges, so do private residences and buy-to-let. According to your investment style, your long-term plan, and the capital you have to pull the whole thing off, you'll want to choose wisely.


One option that investors are choosing as a sure way to withstand market dips is by investing in hotels. With guests sure to occupy rooms each day, there isn't as much risk of extended vacancy. Choosing a location that's either up and coming, or in a big city, where it's sure to bring guests regularly, is also a tactic used in good hotel investments.


However, hotel investing indeed isn't easy and will bring certain headaches with it. Like any major decision, you'll have to weigh the pros and cons.


Pro: Hotels Are Somewhat Crisis-Proof


While the housing market fluctuates depending on the stability of the economy, short-term rentals have more flexibility. Hotels have been able to withstand economic changes by adapting to the climate, which means that depending on the demand of their guests, they can adjust pricing, renovate, and change to better suit them. This isn't something that typical landlords can do as easily. Read this guide for a better understanding of investing in hotel REITs


Con: That’s a Whole Lot of Upkeep and Spending


While investing simply in a building will mean paying taxes for upkeep and certain general expenditures, there are less costs that add up over time, in comparison to a hotel.


Hotels, their rooms, and their amenities need updating, daily cleaning, and restocking. This means that a significant amount of money will need to be spent on products and aesthetics. While you may choose the quality over quantity approach, it doesn't matter which, as long as your guests are happy and the brand is invested in their happiness, too.


Con: Unhappy Guests and Reviews


Hotel guests now have quite a lot of control over a hotel’s online reputation. Websites like Yelp allow them to sound off when they've had a bad experience. Keeping guests happy and keeping up with their needs are essential to surviving as a hotel investor. The same goes for the management - knowing your team is the best way to increase the likelihood of a good reputation and subsequent profits. While investors won’t be to blame for bad reviews, investing with a company with a shaky reputation could mean that the whole project could be doomed if mismanaged.


Pro: Vacancy Won’t Be a Problem


In comparison to commercial properties and buy-to-let, a hotel investment means there will likely be very few vacancies and almost no delinquencies. Because hotel guests have to pay upfront, there won't be issues with unpaid bills.


As long as there's a suitable and popular brand behind the hotel, and the space itself is in an area that will ensure tourists and high traffic, a hotel will be an investment that keeps on profiting.