The rise in global travel, particularly from the emerging market segments of India and China, is the reason behind the inexorable recovery in the hotel sector. Not surprisingly, hotel investment experts from all over the world are enthusiastic about this emerging trend. Hotel owners, operators and investors are quick to move on to new acquisitions. At the same time, it is also true that investments in the hotel sector are plagued by complications and risks. A huge amount of capital is at stake, which requires a meticulously planned move and enormous expertise on the part of the investor. Investors should rely on expert opinion before deciding on an investment. Below are some vital points that need to be rethought before paying money for investment in a hotel.
The property of the hotel, despite having a beautiful face, can be rendered unusable after concluding the business, due to reasons such as the pollution of the underground environment, the infestation of internal molds and structural damage from termites and rodents. Finalize the deal only after thoroughly reviewing the property. Authentication by an engineer to verify all the above conditions and to make sure that the property complies with the building codes is necessary.
Know your hotel management company
If you are thinking of hiring a hotel management company to take care of your business, make sure of its capabilities through various sources. Take a look at its operational performance and cross-check with other hotels it manages. Analyze its record in maximizing revenues and keeping expenses under control.
Analyze visitor segments
It is necessary that the hotel receives visitors from all segments such as commercial, group, business and leisure travelers. Hotels that depend on a single segment for their activities rarely go well during the whole year. On the other hand, hotels that derive visitors from different segments of travelers flow into other segments when a particular segment is slowing down.
Avoid depending on individual companies
Whether your hotel works because of visitors coming from a single activity, depends largely on the performance of that activity. The hotels that depend on the visitors of an airport, a company or an amusement park, can go crazy when these income-generating activities close the shop. For example, if the airport is moved, or the business changes location or the amusement park gets strong competition from a better one, it is still important that the hotel fire continues to burn.
Check the time when the hotel is in season
A hotel that has a season of at least eight months is an option that is worth considering. A shorter season than this period means that the hotel can only meet costs if it has a sufficient average rate during the season. It is also essential that the seasonal months are consecutive
There are some markets where it is easy to acquire land divided into hotels and build an accommodation facility. When funding rules are loosened, these markets see hotel overcrowding. In a market where there are obstacles to enter the hospitality sector for any reason, there is less chance of overcrowding or overcrowding. Therefore, it is always preferable to make an investment in a market where they are high.
Keep the terms easy
Don't overlook the possibility of selling the hotel. Plan your acquisition keeping this fact in mind. Design the management contract and the franchise agreement so that they can be easily resolved. Keep the flexibility intact by assigning or paying the loan in advance, purchasing partners and minimizing the tax exposure.
Choose the brand of your hotel carefully
Before marking your hotel, understand the implications of a brand and which segment of visitors it will attract. Established brands such as business hotels or leisure accommodation are safer than new brands that are still looking for identity.
These guidelines are not the key to the success of the hotel investment. But paying attention to these nuances before allowing money to change hands will surely reap rich dividends.