Why should you invest in hotel rooms?
GreatX
Co-Founder
- Location: USA
Here are five reasons why you need to invest in hotel rooms
- Nightly Leases
- One of the biggest advantages of investing in hotel rooms is they sell rooms by night. This means each night represents another opportunity to increase revenue. That said, one challenge persists: optimizing the net income from each additional room night sold. Sales and marketing make a hotel successful from a technical perspective. Advertising in the right places and selling to the right audience is straightforward. In order to build up a reliable revenue stream, it is more important to focus on intangibles, such as loyalty and property culture.
- High Risk-adjusted Return
- Hotels do provide high yields as compared to other commercial properties, and thus, they are lucrative investment opportunities for seasoned investors. Across the Big Four CRE asset classes, hotels trade at higher cap rates than their counterparts. That said, managing hotel investments is a huge risk. A prudent investor understands risks and constantly seeks to protect the downside while optimizing the upside.
- Tax Benefits
- Tax is a menace for investors; thus, they seek investment vehicles that offer benefits. Direct real estate ownership is one of the most tax-efficient investments. Depreciation, equity growth, and tax-free exchange are the three biggest benefits of real estate investment.
- Expense Structure
- In the USALI (Uniform System of Accounts for the Lodging Industry) standard hotel financial statement, costs are categorized as Departmental, Undistributed, and Fixed. The departmental costs entail expenses associated with servicing rooms and offering food and drink services to visitors. The undistributed costs include management, maintenance, and sales-related expenses. Furthermore, fixed expenses occur whether the hotel is full or profitable. Some common examples of this category include property taxes, site fees, and energy bills.
- A compelling reason to invest in hotel rooms is that hotel management can negotiate with providers to reduce operational costs while increasing revenues. With the increased revenue, the cost of maintaining the hotel does not go up drastically, which allows a healthy profit margin.
-
Community Impact
- Labor takes the lion’s share in running hotels. And to run it effectively, hotel owners require lots of workers, presumably staying in close proximity to the hotel. Moreover, hotels significantly impact creating a substantial job market and driving the local economy. In addition to providing social and business gathering space, full-service hotels provide the opportunity for guests to unwind and reconnect with their loved ones.
- The most successful hotel brands have been able to create a community beyond the boundaries of their properties.
Final Thoughts
While investing in hotel rooms has pros and cons, hotel investment is undoubtedly one of the most lucrative investment opportunities. However, it is also true one should approach it smartly. The growing integration of technology across the real estate sector is also impacting the hotel industry. GreatX presents the first asset-backed tokens focused on savings. We offer hotel tokens as an institutional-grade investment opportunity backed by the U.S. Treasury Bonds. Global investors can now own U.S. real estate assets and register every transaction as a “digital asset” without legal or fiduciary obligations. If you are wondering to own a hotel room, GreatX is the place for you.
Disclaimer
This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document.
Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed herein are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. GreatX disclaims any obligation to update or revise any statements or views expressed herein.
In considering any performance information included in this commentary, it should be noted that past performance is not a guarantee of future results and there can be no assurance that future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which information, although believed to be accurate, has not been independently verified. GreatX and/or certain of its affiliates and/or clients hold and may, in the future, hold a financial interest in securities that are the same as or substantially similar to the securities discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and GreatX and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities. This commentary has not been reviewed or approved by any regulatory authority and has been prepared without regard to the individual financial circumstances or objectives of persons who may receive it. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Here are five reasons why you need to invest in hotel rooms
- Nightly Leases
- One of the biggest advantages of investing in hotel rooms is they sell rooms by night. This means each night represents another opportunity to increase revenue. That said, one challenge persists: optimizing the net income from each additional room night sold. Sales and marketing make a hotel successful from a technical perspective. Advertising in the right places and selling to the right audience is straightforward. In order to build up a reliable revenue stream, it is more important to focus on intangibles, such as loyalty and property culture.
- High Risk-adjusted Return
- Hotels do provide high yields as compared to other commercial properties, and thus, they are lucrative investment opportunities for seasoned investors. Across the Big Four CRE asset classes, hotels trade at higher cap rates than their counterparts. That said, managing hotel investments is a huge risk. A prudent investor understands risks and constantly seeks to protect the downside while optimizing the upside.
- Tax Benefits
- Tax is a menace for investors; thus, they seek investment vehicles that offer benefits. Direct real estate ownership is one of the most tax-efficient investments. Depreciation, equity growth, and tax-free exchange are the three biggest benefits of real estate investment.
- Expense Structure
- In the USALI (Uniform System of Accounts for the Lodging Industry) standard hotel financial statement, costs are categorized as Departmental, Undistributed, and Fixed. The departmental costs entail expenses associated with servicing rooms and offering food and drink services to visitors. The undistributed costs include management, maintenance, and sales-related expenses. Furthermore, fixed expenses occur whether the hotel is full or profitable. Some common examples of this category include property taxes, site fees, and energy bills.
- A compelling reason to invest in hotel rooms is that hotel management can negotiate with providers to reduce operational costs while increasing revenues. With the increased revenue, the cost of maintaining the hotel does not go up drastically, which allows a healthy profit margin.
-
Community Impact
- Labor takes the lion’s share in running hotels. And to run it effectively, hotel owners require lots of workers, presumably staying in close proximity to the hotel. Moreover, hotels significantly impact creating a substantial job market and driving the local economy. In addition to providing social and business gathering space, full-service hotels provide the opportunity for guests to unwind and reconnect with their loved ones.
- The most successful hotel brands have been able to create a community beyond the boundaries of their properties.
Final Thoughts
While investing in hotel rooms has pros and cons, hotel investment is undoubtedly one of the most lucrative investment opportunities. However, it is also true one should approach it smartly. The growing integration of technology across the real estate sector is also impacting the hotel industry. GreatX presents the first asset-backed tokens focused on savings. We offer hotel tokens as an institutional-grade investment opportunity backed by the U.S. Treasury Bonds. Global investors can now own U.S. real estate assets and register every transaction as a “digital asset” without legal or fiduciary obligations. If you are wondering to own a hotel room, GreatX is the place for you.
Disclaimer
This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document.
Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed herein are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. GreatX disclaims any obligation to update or revise any statements or views expressed herein.
In considering any performance information included in this commentary, it should be noted that past performance is not a guarantee of future results and there can be no assurance that future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which information, although believed to be accurate, has not been independently verified. GreatX and/or certain of its affiliates and/or clients hold and may, in the future, hold a financial interest in securities that are the same as or substantially similar to the securities discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and GreatX and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities. This commentary has not been reviewed or approved by any regulatory authority and has been prepared without regard to the individual financial circumstances or objectives of persons who may receive it. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
About the Author
GreatX
Co-Founder
Kong Posh Bhat is a seasoned technologist with 25 years of extensive experience in software engineering, systems engineering, offshore product development, and M&A. Kong Posh has 15 USPTO patents to his name, mainly in the areas of machine learning, pattern identification, software upgrade, remote device management, and media data delivery control.
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