We give property owners the power to unlock the liquidity of our assets.
Smile Hospitality is paving the way for
hotel tokenization.
WHAT DOES IT MEAN TO “TOKENIZE”
A HOTEL ASSET?
Tokenization is a relatively new term used to describe a cryptocurrency fundraise in which investors exchange fiat or crypto currency for “tokens”.
In a nutshell, tokenization is one way to securitize real assets.
To securitize an asset means to divide it into shares that we can sell to investors. In the same way, to “tokenize” an asset is to divide it into shares, or “tokens”, that represent a predefined share of the underlying asset. They are therefore often called “security tokens”.
These tokens are secured through the immutability of blockchain technology, and they’re trade-able via crypto exchanges or Alternative Trading Systems (ATS).
THE SECURITY TOKEN OFFERING (STO) PROCESS
The initial sale of a security token is typically called a security token offering (STO). It’s also sometimes called a tokenized security offering (TSO) or a tokenized asset offering (TAO). But no matter what term you use, the result is the same.
Please note: An STO is not the same thing as an initial coin offering (ICO).
ICOs offer investors a token, but this token doesn’t necessarily represent ownership in the underlying asset or company. In many cases, the tokens sold are called “utility tokens” because they only have value on the company’s platform. Buyers are therefore “investing” to support the project and with the hope that, as the platform grows, the value of the tokens will increase.
STOs are distinct from ICOs because the tokens sold (security tokens) represent ownership in a real asset. STO investors know the real value of the underlying asset they’re buying and benefit from any future price appreciation in the asset.
LISTING TOKENS ON AN EXCHANGE
Once tokens are created and sold to investors, they need to be listed on an exchange so investors can trade their tokens.
Many of the most popular cryptocurrency exchanges are in the process of obtaining regulatory approval to list security tokens. Another option is to partner with an Alternative Trading System (ATS): These are FINRA-registered institutions that sometimes partner with tokenized security asset owners to list security tokens and provide their investors with access to a liquid secondary market. Our ATS partner is Templum Markets.
Keep in mind that a single token can be listed on multiple exchanges.
HOW INVESTORS AND OWNERS
BENEFIT FROM TOKENIZATION
Tokenization removes the middle man, making it easier and cheaper for investors to buy/sell real estate and for owners/developers to raise capital. Investors can trade tokens almost instantly and for a very low fee (similar to stock market trades). Real estate has historically delivered attractive returns, but it has high barriers to entry because the assets involved are so expensive. Investors in tokenized real estate assets get the best of both worlds: the high returns of real estate investments (even with a very small investment), and the liquidity of the stock market.
It’s also important to note that because real estate tokens are backed by real assets, they carry far less risk than cryptocurrencies or ICOs, which are highly volatile and speculative assets. What’s more, stabilization measures can be put in place to ensure the value of the security token does not deviate too far below the underlying net asset value (NAV) of the property.
