Along with investing in residential units for renting out, some people also purchase commercial property since such objects often bring more income. But they are much harder to manage. And when it comes to hotel, try to imagine what your chances for success are if you don’t know how to own a hotel.
Residential vs. commercial real estate
These two options offer similar ways to make money by renting out. But when you deal with an apartment, you can manage most of the work by yourself. When it comes to offices or other commercial objects, things get complicated. You will need the help of professionals such as electricians and plumbers much more often. In some cases, you may also need to hire a managing company.
Now when it comes to hotel business, the list of professionals you have to hire gets even longer. Receptionists, maids, managers, doormen, chef and other kitchen staff – and it goes on. But let’s suppose you have enough money to make a team. Can you efficiently manage such business while competing with other hotels? The risks seem not so good, don’t they?
Alternative hotel investments
If you don’t know how to own a hotel, it doesn’t mean such investment options are out of question for you. Nowadays there are hotel developers who sell individual hotel suits to private investors. So instead of buying the whole building, you can actually purchase several rooms in one or several hotels. Such an option is more suitable for those without hotel business experience in many respects.
- The very first advantage you get is diversification. Never forget that putting all eggs in one basket is way too risky. So it’s safer to distribute your money between various assets. If you own ten suits in ten different hotels and one of them faces a crisis period, your income will reduce by just 10% instead of 100%.
- Furthermore, by investing in different hotels, you can achieve geographical diversification, thus reducing the risks on the regional level. For example, you can buy a hotel suite in London, two hotel rooms in Dubai, two in New York, etc.
- Another advantage of this strategy lies in delegating the administrative function to a hotel managing company. Such firms not only hire and train professional staff but also work under world renowned brands – Wyndham, Hilton, etc. People tend to trust global chains, which guarantees competitive strength for such hotels.
- Lastly, by letting a managing company take care of your suit, you can turn your income into residual one. Although the operator takes a fee for its services, it lets you stay in your home country and concentrate on your own business. For those who have no idea how to own a hotel, this is a serious advantage.
Another hotel investment option is purchasing a mini hotel – it’s cheaper than a standard one, but be careful. Such real estate requires proper management and tons of effort. Usually such hotels become a family business. And if things go wrong, don’t expect any help from managing companies. Hotel operators are rarely interested in properties with less than 100 suits.