Even though the hotel industry was among the worst affected by the pandemic, it’s poised for a future turnaround for those that invest in a renovation to meet new standards. Entrepreneurs looking to enter the market can be competitive with the right investment choices that modernize the hotel experience. Here’s a look at why hotels and resorts continue to attract large investors.
The main reason why investors get involved with hotels is for long-term steady economic gains. Practicing proper risk management can lead to a high return on investment. A few ways in which hotels can reduce risks include adopting digital transactions, investing in security cameras, and creating backup plans to prepare for economic downturns.
Another financial reason to invest in a hotel is to tap into tax benefits, such as getting a tax deduction if the property depreciates in value. Hotels subsidized by local governments can, in return, raise tax revenue from guests, depending on the state and jurisdiction.
Hotels create opportunities for added value. They can partner with local tourist attractions to offer vacation packages. Some hotels offer rewards programs for their most loyal supporters. Others focus on providing a seamless internet experience for business travelers. Some investors are looking for ways to capitalize on how inflation is driving up the hotel rates.
Building Diverse Assets
Protecting capital is a top priority among successful investors. One basic way to protect a capital base is to diversify investments in different sectors. Many hotel owners invest in other markets as a strategy to create a diversified investment portfolio. Whether a hotel earns regular revenue or not, it’s still a valuable commercial real estate asset that can be used to leverage other assets.
Asset diversity is essential since it can offset losing investments with winning investments. Investing in one asset can be risky, so many investors like to spread their money over different equities. It’s a strong investment that’s more likely to hold or gain value than the decline in value.
Personal Reasons for Investing in Hotels
Some investors simply enjoy running hotels, especially near a waterfront or tourist attraction. They like meeting visitors from around the world and feel rewarded when they are able to provide a nice lodging facility for travelers. Independent hotel owners enjoy the freedom to run a business that promotes leisure and relaxation.
Some entrepreneurs might wish to build a reputable brand in their communities and provide solutions for housing problems. An independent hotel owner who builds a successful brand in a tourist town can gain tremendous prestige and become a travel destination. A family hotel business that has survived several generations is viewed by many travelers as legendary.
Plenty of reasons exist for investors with substantial capital to invest in hotels or resorts. Hotels are valuable properties that can be repurposed in a crisis. Over time hotels pay for themselves. As long as an owner understands risk management, they can reap huge financial rewards. Contact us at California Lodging Investment Conference to learn more about the benefits of investing in hotels and resorts.