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What are the Best Tips for Hotel Investors?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 23 August 2016
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    Conjecture Corporation
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Deciding to become a hotel investor is a business venture that requires a great deal of consideration before committing any type of funds to the project. This is true for either the construction of new hotels or purchasing an existing hotel or hotel chain as a means of creating an ongoing revenue stream. Hotel investors typically look closely at such factors as the location of the investment, the condition of the facility, and the ability of the hotel to successfully compete with other lodging options that are in the immediate area.

When it comes to location, hotel investors know that in order to consistently attract customers and make money, the hotel must be located in a part of town that is considered accessible and convenient for travelers. This sometimes means that the hotel must be strategically located near amenities such as shopping, beaches, airports and various local attractions that entice people to come to town. Looking for a hotel that is located on or near a main artery into and out of the city is often recommended, even if the hotel will offer shuttle service to and from airports and other key destinations around town.

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Another important aspect that hotel investors must consider is the type of amenities that are offered at the hotel itself. Rooms must be clean and up to date in order to attract visitors. Today, this often means providing some type of high-speed Internet connection in each of the guest rooms, along with access to basic business services at the front desk, such as faxing. In addition, chains that tend to offer services like wake-up calls, cable television, and turn-down services are likely to attract more attention than those that do not much in the way of basic amenities.

The current and projected finances of the hotel are also very important when hotel investors begin to evaluate the potential of the investment. With an existing facility, the idea is to determine if the current condition of the building and the list of amenities are resulting in a consistent operating profit. When considering the construction of a new hotel, looking into the revenues generated by similar facilities in the area will help provide a reasonable idea of what type of returns to expect, once the hotel is open and has begun to attract attention from visitors. Making sure the investment is profitable is crucial, since the idea is to make money from the investment, possibly in the form of regular returns over a number of years.

There is no one magic formula that hotel investors use to determine if a given investment is worth the time and effort. Each opportunity must be evaluated on its own merits or lack thereof, and decide if the projected return is acceptable for the amount of risk that the investor will take on. Should an investor feel uncomfortable with a given deal for any reason, following his or her instincts and moving on to other opportunities is often the best decision in the long run.

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