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With the looming shade of Covid-19 slowly dissipating and vaccines rolling out, tourism is likely to resume in some capacity in the near future. Real estate investors have the perfect entry point into the hospitality real estate investment market. With so many businesses looking to cash out, it’s easier to acquire real estate investments now than ever before.
However, it’s important to remember that not all hotel real estate investments will be profitable. As an investor, you need to know what to look for to determine if a particular investment is worth the time and money you’re going to sink into it. Nine experts from Forbes Real Estate Council weigh in with some pointers for investors looking to jump into the hotel real estate market.
1. Network, Research And Work Hard
There is no substitute for networking, research and hard work. Your team needs to make a concerted effort to constantly call the brands, lenders and special servicers and all of your contacts in the industry to uncover potential deals before they are already cooked up. Do research on the deal, as well as on the overall market itself because you don’t want to buy someone else’s headache. – Carlos Jose Rodriguez, Driftwood Capital
2. Focus On Creativity And Versatility
Opportunity is everywhere. Downturns are a great way to focus on creativity and versatility. For example, a hotel in the mountains where clients are typically daily renters may be able to retarget to consumers looking for long-term “work away” accommodation. Directly partner with businesses and local activities of interest so that you can offer “a stay way, with local living.” – Marco Del Zotto, LIV | Sotheby’s International Realty – Breckenridge CO
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3. Consider A Modular Approach
Like many things, the hospitality industry is also seeing a modular approach thrive. Specifically, take the lessons of developing and building a hotel property and apply that to a portfolio of properties in a city that can leverage Airbnb, VRBO and other platforms. Providing a hotel-like experience in a diffuse way has tremendous upside today. – Rayan Rafay, Fraction
4. Identify Tourist Areas
Identify unsuspecting local tourist areas. While people aren’t traveling as much out of state or by air, they are traveling locally by car and RV. Recreation vehicle sales, boats and RV companies are having record all-time sales. This speaks well to properties and opportunities near lakes, parks and outdoor camp sites in local markets. – Jason Duff, Small Nation
5. Look For Solid Fundamentals
We are seeing many hotel investors looking for properties with solid fundamentals, in heavy population centers, to repurpose as multifamily assets. These properties are especially viable if they have kitchenettes already built into the rooms, making them more easily converted into studio apartments. – Steve Alkandros, New England Management Group/AR Property Services, LLC
6. Consider Physical Access Conditions
What the hospitality-seeking buyer should be looking at is whether the property is located in an area that needs to be accessed by air travel. What are the pandemic procedures for travel to that given area? Canada recently consolidated incoming air travel to particular airports due to screening needs and quarantine requirements after entering the country. Travel will be difficult. Be careful. – Michael J. Polk, Polk Properties / Matrix Properties
7. Consider Building Retrofitting
With the Biden administration, there is a focus on building retrofit grants. Hotel owners should consider getting in front of organizations like the Green Building Alliance or EnerYields to get access to grants or low-interest loans for upgrades that can increase hotel value. – Saurabh Shah, InstaLend
8. Look At Less Populated Areas
Hospitality properties in less populated areas that already had detached boarding options have fared well during the pandemic. Resorts, lodges, RV parks and even campgrounds that could accommodate guests seeking a private space outside of a main building will continue to be a viable investment opportunity into the future. Exterior corridor hospitality will fare better than interior corridor as well. – Noah Grayson, South End Capital Corporation
9. Don’t Only Go For Sexy Opportunities
Don’t always jump for the sexy opportunities. Balanced portfolios will have trophy properties and properties that need work but are much more stable with reasonable operating expenses. During the pandemic, service hotels (along highways, low to mid-end) have fared relatively well because even during a pandemic, certain activities don’t cease. Remember, if your ADR is over 62%, you’re making money. – Charles Argianas, Argianas & Associates, Inc.