Increased international travel, especially from emerging market sectors in the United Kingdom, is the reason for the sudden rise in the hotel industry. It is not surprising that hotel investment property experts around the world are drawn from this emerging trend. There is a huge amount of capital at stake, and this calls for a carefully planned step and tremendous experience by the investor. Investors must rely on expert opinion before deciding on an investment. Below we discuss some vital points that need to be considered again before putting down the cash investment in a hotel.
The property of the hotel, despite offering a beautiful face, may become unusable after the completion of the transaction, for reasons such as pollution of the underground environment, internal mold injury, structural damage of termites and rodents. Only end the deal after you have thoroughly investigated the property yourself. The certification of the Engineer to verify all the above conditions and ensure that the property corresponds to the building codes is necessary.
Know your hotel management company
If you are considering hiring a hotel management company to keep in mind your business, make sure their capabilities are through different sources. Take a look at his operational performance and retreat with other hotels he manages. Analyse their record in maximising revenue and keeping expenses in control.
Analyse visitor segments
It is essential that the hotel receives visitors from all sectors such as business travellers, groups, businesses, and entertainment. Hotels that rely on one segment of their business rarely achieve good results throughout the year. On the other hand, hotels that draw visitors from a variety of travellers are distributed to other sectors when a particular segment registers a recession.
Avoid relying on individual companies
If the hotel is driven by visitors coming from a single business, it will depend to a large extent on the performance of this business. Hotels that rely on visitors from an airport, a commercial company or a park, can go berserk when they close these income-generating shops. For example, if the airport is moved, or the company’s headquarters or amusement park changes in stiff competition from a better place, it is nevertheless important that the hotel continues to burn.
Barriers to entry
There are some markets where it is easy to get the land allocated for the hotel area and build the accommodation facility. When financing standards are relaxed, these markets see overcrowded hotels. In the market where there are barriers to entry into the hospitality trade for any reason, there is less likelihood of increase or overcrowding. Thus, it is always better to invest in a market where you are high.
Keep the terms easy
Do not overlook the possibility of selling the hotel in the end. Plan for your acquisition while keeping this fact in mind. Design the management contract and franchise agreement so that it can be easily terminated. Keep your flexibility intact by setting a foreclosure or prepayment, buying partners and reducing your tax exposure.
Choose your hotel brand carefully
Before branding your hotels, you need to understand the meaning of the brand and what segment of visitors it will attract. Established brands such as business hotels or entertainment venues are safer than new brands that are still groping for identity.
These guidelines are not the key to making your investments in hotels successful. But paying attention to these nuances before allowing money to change their hands will certainly make big profits.