It is now easier than ever to enter the world of hotel real estate investment. Generalist investors are increasingly drawn to the sector by the emotional attraction of owning a hotel, seduced by the investment yields that trading assets, like hotels, provides.
In today’s real estate investment market, any asset that provides a regular yield and opportunity for underlying capital growth is going to attract investors, but it is exactly the seduction of hotels which can trouble the generalist investor in a sector that is unlike any other.
Hetherley Capital Partners’ Top 5 “Must do’s” for the new generalist investor in hotels:
- Know your Market
This first stage is crucial to everything that flows from this point. Know your competition; who they are and how they trade. Know the major demand generators of a hotel and what the future supply horizon looks like. In our experience, a detailed study on the dynamics of the competitive market at an early stage is time well spent.
- Understand what the hotel brand actually delivers (rather than what the brand owner says it does!)
All brands talk a great game – that’s their job. A word of warning – Don’t believe the hype! Take time to challenge the brands on their system delivery stats and how they are going to add value to your hotel. Monitor these results once the hotel is operating and don’t be afraid to circle back on promises made.
- Invest in Your Asset
This is a crucial element, particularly when it comes to acquiring an existing trading hotel that requires refurbishment. At Hetherley we commission detailed building surveys and property condition reports at the early stage of any acquisition. If you believe that you can fundamentally change the fortunes of a hotel without investing in the product, then you are setting yourself up for a fail.
- Hire an exceptional General Manager/Management Team
The importance of hiring the right General Manager or Management Team who you can trust to translate your investment strategy into the day-to-day operation of the hotel cannot be understated. Incentivise them to achieve profit targets and include them within investment strategy meetings. They are the face of your hotel and a crucial part of the team.
- Get comfortable with Operating Risk
With the rise of franchise and third-party management contracts, hotel real estate investors are increasingly having to face up to the concept of “Operating Risk”. Effectively this equates the value of your hotel to the profit levels it achieves. It’s a cyclical industry, profits go up and go down. Tailor your investment strategy in the knowledge that things may not play out as you had originally envisaged and have a Plan (B) prepared for when they don’t.
For the majority of sector-specialist hospitality investors, these measures may seem so blindingly obvious so as to not warrant further consideration, but it is exactly these areas of a hotel real estate investment that generalist investors can too easily overlook.
About Hetherley Capital Partners:
Hetherley Capital Partners is a specialist hotel investment, operations and asset management firm able to deploy a comprehensive range of acquisition, hotel management, financial and asset management functions across all of its hotels.
Based in London, Hetherley was established in 2012 and continues to grow its portfolio of UK hotels alongside its capital partners. Acquiring and operating hotels with significant capital value upside, Hetherley has a proven track record through all aspects of hotel investment, from deal origination to successful exit, delivering superior, risk-adjusted returns for its capital partners.
For Further Enquiries please contact:
Tel: 0203 794 7732