5 Keys to Hotel Investment
Real estate investing options abound. Brokers use marketing materials that catch your interest and make you imagine the sale. A good hotel investing plan helps you avoid their seduction. It puts you in a proactive position to direct your team toward business-moving initiatives.
Aim
Every plan begins with status quo and goal. The status quo determines your difficulties and development prospects. Your goal is where you want to be by the deadline. Real estate investors must specialize to succeed. Business growth requires a firm basis. Play to your strengths and set daring objectives to improve your flaws. Hotel specialties vary widely. Start with region, then add product category, brands, and risk appetite.
These four factors help construct a hotel investment plan. Institutional investors concentrate on Marriott, Hilton, and Hyatt select service properties in main and secondary markets. A regional definition clarifies the goal. This narrows the pool of more than 65,000 US properties to 1,500 (give or take). These hotels may be visited in a year or two. Expect less than 1,000 investors to hold a sample, which simplifies direct marketing.
Narrowing your approach improves public image. Every bargain you make marks you. The transactions you examine with owners, brokers, and significant third-parties reveal your interests. In response, they'll provide you relevant opportunities. This requires discipline. When something somewhat similar appears, it's simple to widen your investing criterion. Each new feature generates a learning curve that distracts you from other chances.
Alignment
Your hotel investment plan includes both asset management and investment criteria. Hotel investment requires work and cash. Your approach to attracting customers, managing everyday operations, and making large capital investments affects the firm. Hotel ownership has several paths. Many hotel investors start as operators or real estate investors. It's crucial to identify your skills and choose partners that fit with your plan.
Hotels affect many lives. Human factor is key to hotel success. Your operational plan should address hotel culture. After that, you may define systems, procedures, and branding. Real estate investments need both asset and property management. Long-term vs. short-term concentration defines their perspectives.
This relationship's constructive tension holds both parties accountable to their goals. Define how you'll affect visitors and staff. Define how this affects investment returns. Long-term income and operations are solid because of property culture.
Build-Ready
Brands realize an ownership shift is the best moment to improve. Most franchise sales occur before expiry. This offers companies negotiating leverage and lets them demand a higher-quality product. Even independent establishments without a brand-mandated PIP may need little tweaks. A 4% FF&E reserve seldom meets a property's long-term demands. New owners must plan early for a big capital improvement project.
Even if not in the beginning, every hotel investment plan should include a refurbishment. The approach should address quality, cost, and timeliness of improvements. Brand-approved suppliers may determine this balance. You can control their deployment. Rooms, public spaces, building systems, and building exterior are hotel construction areas. All of these areas are vital to the guest's experience at your hotel.
- Comfortable, private rooms
- Public places appeal to your target guest's social side
- Building systems must be unobtrusive and work
- The building envelope keeps the elements out
Teams
Hotel investment strategies must integrate construction and operations. Operators must manage and market guest-impacting renovations. A remodeling takes rooms out of service and affects the atmosphere in others. Your team's competence and bandwidth are key to project success. On-site workers may undertake minor paint, carpet, and FF&E renovations. Major capital improvement plans demand a hotel-experienced general contractor.
Consider the potential cost of transferring an asset manager into a project management function. Growth-focused strategies may benefit from outsourcing.
Friendly
Business depends on relationships. Great firms are made up of individuals who work together with trust. A strong hotel investing plan emphasizes people and connections. Identify business stakeholders. Most hotel businesses' key stakeholders include employees, visitors, and investors. Each has various requirements and interests and should be surprised.
When seeking new investment possibilities, you add a middleman. Each new business source you pursue joins your value chain. Learn what they value and leave them better off. Purposefully develop relationships. You must sort through hundreds of options to discover the right one. Your relationship approach should include clarity, patience, and resilience.
Marketing involves maintaining relationships. Your brand grows with each person's interactions. This is unusual. Your target probably isn't trying to learn more about you. You must be the spark for each relationship's goals.
Iteration
Every successful company required time. Branding and operations improve via trial and error. Regular reporting and repositioning will keep your hotel investment plan fresh. Best practices for real estate investing are consistent. Technology enables new business techniques. Expand your view of technology to embrace new ways to practice your art.
Monitor your company using the aforementioned views. First maximize your own resources, then seek outside help. Seasons or trends affect businesses. Operational problems and opportunities are cyclical tendencies. Values or mentality transformations are secular tendencies. Your firm may be growing from select service to extended stay.
Long-term goal to establish a proprietary operations platform instead of employing third-party management. Use the seasons to define your business's cycles. Always reposition with the goal in mind. The quarterly, yearly, or decade-long aim frequently matters more than daily techniques.
