It seems that each new day brings an ever increasing number of hotel property investments to the market and with the expansion in that sector worldwide those considering their first foray into what can often be murky waters need to consider carefully their options.
As always, the first rule of investing is acquire as much knowledge as possible; consult with specialists in the field and set out to rule with your head not your heart. It is easy to be carried away by a glossy brochure, a wonderful website, beautifully crafted CGI fly through of a proposed development or the patter of a foot through the door sales pitch from a sales team who have their interests at heart and not yours.
Whether it is an existing property, a refurbishment or a brand new development, you can begin to minimise your risk by undertaking thorough due diligence. Prepare, make a list of detailed questions to ask, talk to experts, speak to people with local knowledge, if the investment is overseas will you have the chance to visit it before you buy, take industry advice, consult property and legal specialists and don't let fear of loss be the factor that guides you to part with your cash instead of walking away when walking away may be the prudent thing to do.
In hotel investment you should consider location, political stability, proximity to similar properties, climate, transport access, is the area a known travel destination or does the property have to be the attraction in itself, what is the hotel's target market and does the demand justify the rooms available, is the market seasonal or year round etc. Your list will be a lot longer than that and so far we haven't mentioned the three most important factors, the return on your investment, how secure your investment will be and your options to liquidate your ownership at any point in the future.
Other considerations include things like, who is running or will run the property, is it part of a chain or is it a standalone boutique, are the developers building to sell or do they have a long term interest at stake, is the land unencumbered, is the development financially ring-fenced to the extent that if all else fails the land is owned by the investors.
Imagine a development that sounds great, looks good as it is being constructed and almost daily you are receiving slick emails giving you latest 'good news. But as the project end date appears to keep moving away down an ever-expanding timeline you find out that the developer has started another project only this time they have mortgaged the first property to finance the second. One day you may wake up to find the developer has gone bust, the banks own the land and your investment has been used to line the pockets of those who have vanished over the horizon. Sound familiar? It has happened and will no doubt happen again. Unfortunately it happens most to first-time, go-it-alone investors who were sucked into overhyped schemes, often following a bandwagon of those (think friends and family) who went in head first and bragged loudly about what they had bought.
So is hotel property investment for you? Of course it can be, you just need to have a great strategy in place, understand and minimise the risks, don't take promises at face value over hard facts, develop a relationship with trusted, straight-talking advisors, look at the opportunity from every angle and you should experience sound investment outcomes while happily expanding your property portfolio.