Background
Investing in Hotel business is no doubt another very lucrative form of property investment. Hotels are different from other commercial real estate investments in that they are a special blend of investment in a business and in real estate. At some particular time, many successful real estate investors consider adding a hotel to their commercial real estate portfolios.
This could be through direct acquisition of an existing structure, which will now be restructured; a land that will be developed into a hotel; or a going concern. By buying an existing Hotel run as a going concern, the owner acquires not only an income producing property but also any businesses that are situated on the property.
The businesses on this type of property operate largely on their own but the new investor may opt for other methods to improve cash flow if necessary. Although a hotel may already have professional management in place, owners should be prepared to address the operational details or future improvements of their investment.
State of the market
Investing in hotel/motel properties requires that you know your niche, or at a minimum have a vision for creating that niche. Who will your clientele be? What drives the market in the area you’re looking to invest?
Finding this niche and matching it with the appropriate property is critical. A moderate hotel with a restaurant, bar and gift shop, located in Mutshin might attract enough business to keep the doors open, but the same property located on the Island will likely struggle against the larger more upscale resorts catering to the affluent members of the society. Knowing your target market and matching your services to the clientel is a critical key to success in the hospitality industry.
The long-term outlook for hotel/motel investment opportunities remains very strong. As business/ leisure travellers continue to boom Hotel owners will as well continue to be in business, providing full service resorts and tourist/relaxation centers to over 140M Nigerians and visitors seeking fun.
Hotel business as a multifunctional income earner will continually remain attractive to investors. The bar, restaurant, banquet halls as well as lodging are all independent income generating avenues making Hotel business a conglomerate of sort.
Management Structure
A hotel owner needs to choose whether to operate the hotel independently or contract with a professional management company. Hiring a management company can remove much of the daily burden from the owner.
Challenges
Like any other investment, the hotel business has its share of risk. Identifying these risks and zeroing in on which risks you will be most exposed to is the best way to mitigate them. These, are mostly as it relates to the ability to generate revenue and perhaps more unpredictable, the costs associated with lodging operations.
As well, a hotel owner/operator becomes an employer, subject to complex federal and state laws regulating and governing employment issues.
Many hotel properties rely on the significant share of profits generated by food and beverage service, as such there could also arise the issue of taxation on such items depending on location.
Conclusion
In summary, hotels are a commercial real estate investment as well as a real business. It is in fact a conglomerate of sort.
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