It might sound like an odd question to ask, but how exactly does someone buy hotel rooms in the first place?
Let's
start at the beginning. Experienced hotel developers, both domestically
and abroad, have traditionally used bank and private investor finance
to fund the development of major high-end developments. Many of these
developers now allow private investors to buy hotel rooms within these
upmarket developments in much the same way you might buy any other
property.
As an investor you benefit from the capital appreciation
in the same way as if you were buying a traditional property but with
two added benefits. Firstly, buying a hotel room is essentially a buy to
let investment - but without the need for you to find tenants or to
manage ongoing requirements. As the hotel attracts guests you earn a
percentage of the room rate - covering your mortgage costs and
potentially delivering a healthy profit on top.
The suites in the
hotel are pooled so that you're not reliant on your individual hotel
room being rented but rather share in the overall success of the hotel.
Being able to offset your individual exposure in this way is, for many,
what makes buy to let hotel rooms such an attractive investment when
compared to the risks inherent in buying an individual property to let.
Secondly,
as an investor you'll also have the personal use of your suite for a
fixed number of days throughout the year. In short, that means you'll
have a high-end holiday home to enjoy for up to 8 weeks a year and you
won't have to worry about who is looking after it while you're not
there. For those investors that don't require personal use, buy to let
hotel rooms are even ideal for purchase via SIPPs or other personal
pension investments - giving them tax free capital growth and earnings.
Having
said that, the most obvious attraction to investors considering who
want to buy hotel rooms is that the developer and management company who
run and staff the hotel are responsible for ensuring that the hotel
rooms are full and the properties are maintained to the highest
standard.
That includes everything from delivering a top-class
finish to promoting the resort and managing the staff to ensuring a
premier customer experience. The in-built management of the hotel makes
buying a hotel room an ideal opportunity for the more 'hands off'
investor more interested in capital growth and high yields than fixing
broken toilets or placing 'to let' ads in the local paper.
Of
course in both property and travel, location is everything. So, the
first job when considering buying a hotel room is to find somewhere that
will attract a steady stream of visitors. Opting for a more established
tourist destination is often the safest bet. Somewhat unsurprisingly
consistently popular places like Spain, Portugal and Dubai provide the
best mix of solid tourist numbers and high-end developments that fit buy
to let hotel rooms.
When considering the development itself, it's
worth viewing it as both investment and holiday destination. Is this
somewhere you would consider visiting yourself? Does it offer the
features that will attract guests? How high will the standard of
accommodation be?
Similarly, the quality and track record of both
developer and management team that will run the hotel must be first
class. One of the biggest attractions to investors is in knowing that an
experienced team is running the show. Experienced operators will have
access to thousands of travel agents and potential clients worldwide and
a wealth of experience in managing high-end hotels.
Once you're
satisfied with the development, location and management the final step
is the deal itself. Although buy to let hotel rooms can offer a
potentially safer investment than going it alone, if you are going to
buy hotel rooms you need to do so at the right price. Buying hotel rooms
can actually amount to a relatively low cost upfront investment. In
most cases when considering a buy to let hotel room the developer's
agents will have already negotiated bank finance and the developers may
often agree to pay fees and costs.
Once you've done your homework
and found a development and investment that suits you, the process of
buying a hotel room is not vastly different than investing in any other
buy to let property.
Overall it's not really the 'how to buy hotel
rooms' questions that counts - that's the easy part - but rather the
'why buy hotel rooms' question that you should consider. Reduced
personal exposure and the involvement of an experienced, professional
management company are the factors that makes the idea of buying hotel
rooms so attractive to investors in the first place.
