Are you looking for a good investment for you money and you are finding that investment in properties interesting? Invest in Hotels can be an interesting investment opportunities because they generate income and build long-term wealth. Compared to other property, hotel investment have its own advantages. Hotels are able to adjust their room rates on a daily basis. This gives investors a unique ability to adjust prices to match demand, both in stronger or weaker economy.
However, investing in hotel can be very risky if you have neither sufficient funds nor experience in operating them. It can make you back off from your investment plan. Not to worry, because there are other ways to invest in hotels other than buying and operating an actual hotel all by yourselves. They are:
- Invest in hotel REITs
- Buy the stock of a hotel owners or operators
- Participate in hotel finder online platform
Let’s see each option in details.
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Hotel Investment: REITs
A Real Estate Investment Trust (REIT) is a company or special-purpose vehicle that owns, operates, or finances income-generating real estate, including hotels. REIT is very similar to mutual funds. It pools the capital from a large number of investors. REIT will collect income from hotel operators that are in its portfolio, and pay dividends to investors.
The advantages of investing in hotel REITs are it requires less investment compared to buying a hotel. Less investments means that the investors are able to diverse their portfolios across a number of hotels. It enables the investors to capture opportunities presented by different locations and/or markets served. Another advantage is higher liquidity for the investors. REITs can be bought and sold in capital markets, just like equity shares. Investors with shorter time horizon or liquidity needs can sell its REIT investment faster than selling a hotel.
However, investing in hotel REITs also hold risks. A higher dividend payout by many REITs may force hotel management to go for higher leverage to expand its holdings. Higher leverage may result in financial difficulties, especially in recession.
REIT is a relatively new in Indonesia. Currently there is no Indonesian REIT specializes in hotels. However, in Singapore there are many REITs with Indonesian hotels in their portfolios.
Invest in Hotels Stocks
Another way to capture benefits in hotel businesses is to invest in hotel stocks, either in hotel owners or hotel operators. Hotel owners are those who owned the land and buildings occupied by the hotel, while hotel operators are those who offer the competency of operating hotels without owning the assets.
Hotels in traditional ways usually are owned and operated by the same people. But as the hotel industry grows significantly more complicated, the two are usually separated to achieve better results for both of them. Reputable chain hotels such as Astor and Hilton may be both owners and operators of the hotels. But some companies are specializing in hotel operation only without investing any assets. It gives them the flexibility to operate multiple hotels without significant investment requirements. Buying stocks in either hotel owners and hotel operators is giving portfolio diversification with limited amount of capital to the investors.
These are the considerations to think about on investing in hotel owners and hotel operators. The hotel owner benefits from the upside returns and bears the downside risks of the business. It means the hotel owners benefits mostly in stronger economy but bears the most risks in weaker one. On the other hand, the hotel operator’s revenue stream is limited to its management fees, making it more stable in recession but without significant gain in good days. You may find a number of quality hotel stocks in Indonesian capital market.
Participate in hotel finder online platform
Hotel online platform such as the international AirBnB or RedDoorz and Zen Rooms allows people who have available space for rent to attract more visitors. It serves as a marketplace to bring together those who are in need for rooms and those who have rooms to rent out. By using these platforms, you are investing in a hotel room rather than an entire complex of hotel.
Because of the brand that they are carrying, they set certain standards for the rooms that they are selling. Some of the standards can even be compared to hotels, making it the closest investment to hotels as you can get. This is also true for apartment rental that works as hotels.
Investment in hotels are not always about having a sufficient fund to buy land and buildings or hotel stocks. It can also be investing in space that you have already have. If you do have the rooms that you do not want to let empty, then participation in the platforms is the perfect hotel investment for you. You can let them manage the marketing and promotion, and you will profit from the rental income net of management fee. How great can it be? Now you can be sure that you make a good investment.
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