You read the figures and shake your head in disbelief… Frustrated, you decide that enough is enough. You are tired of losing money on that classic savings account. Could buying a hotel room investment be a solution?
This alternative form of investment has been popular for some time in other countries, such as the United Kingdom and the United States.
Your savings won’t yield a cent more on a traditional savings account. Indeed, when you subtract the inflation rate from your interest rate, you have to face reality.
You simply have to conclude that you are running in the red on your classic savings products such as a savings account.
On this page, you will learn more about this particular type of investment and whether buying a hotel room investment is actually a good alternative. You will also see what hotel investments are available for private investors like yourself!
Here you can read more about the general principles and the advantages and disadvantages of such an investment in a hotel.
Table of Contents
- 1 What does buying a hotel room investment bring in?
- 2 Offer 1 – Tourism investment property in full ownership
- 3 Offer 2 – Recreational real estate as an investment in co-ownership
- 4 Ten advantages of buying a hotel room investment
- 4.1 Advantage 1 | Relatively high efficiency
- 4.2 Benefit 2 | Stable and diversified income stream
- 4.3 Benefit 3 | Invest without energy when buying a hotel room investment
- 4.4 Advantage 4 | Professional management
- 4.5 Advantage 5 | Surf on an existing brand
- 4.6 Advantage 6 | Relatively low entry cost
- 4.7 Advantage 7 | Official documents as with classic real estate
- 4.8 Advantage 8 | Holiday advantages of buying a hotel room investment
- 4.9 Benefit 9 | Appropriate hedging against inflation
- 4.10 Advantage 10 | Tax savings
- 5 When is it a good time for buying a hotel room investment?
- 6 Disadvantages of buying a hotel room investment
- 7 Golden tips from Donald Trump | Buying a hotel room investment
- 8 Additional information on buying a hotel room investment
- 9 Other offers carefree investment in real estate
What does buying a hotel room investment bring in?
First of all, we need to clear up a misunderstanding! Investing in a hotel room does not mean that you can be a permanent tourist in your hotel room whenever you feel like it.
In certain cases, however, investors do receive a discount for spending the night in the hotel or in other hotels of the hotel chain.
Buying a hotel room investment is an alternative investment to the classic savings account, which, with today’s inflation, is a loss.
You are actually purchasing a share of the hotel’s profits. This means that the return on this investment depends on how well the hotel is performing.
When you buy a hotel room investment, you can count on two components of return:
- Recurring rental income, and
- Possible added value at a later sale
Component 1: recurring rental income
The more overnight stays booked, the higher the hotel’s occupancy rate. And the busier the rooms are occupied, the greater the profit margins.
People who think of buying a hotel room investment typically have a medium to long investment horizon. The fact is that most new hotels go through a growth period.
A period to grow into an established value and to find the right partners, also online.
Component 2: added value on sale
Apart from the recurring rental income, the total return on your investment in a hotel room can only be determined in retrospect, after the sale of the hotel room.
In the event of a subsequent sale, the aim is to realise a surplus value. In other words, you sell for an amount higher than the original purchase price.
A hotel room can offer attractive added value in the medium to long term. Of course, everything depends on factors such as:
- Past track record (return of the past years)
- State of the hotel
- General forecasts for the tourism sector of the region and country concerned
- The general evolution of the real estate of the country in question
- The reputation and expertise of the hotel operator, and so on.
Offer 1 – Tourism investment property in full ownership
Are you looking to invest in a hotel room and do you want as much certainty of return as possible and as little risk as possible?
As an investor in this luxury resort, you can acquire full ownership of a buy-to-let property starting at EUR 42,500 (and a suitable (mortgage) loan).
You can acquire tourist property units here and earn as much as three components of return:
Guaranteed annual return
If you decide to invest in a luxury room/studio, flat or tree house in this resort, you can count on a carefree rental guarantee. You just need to keep an eye on your bank account to receive the deposits.
In concrete terms, you can count on a guaranteed increasing return in this French luxury resort (calculated over the full purchase price of the property):
- 5% for the first year
- 6% for years 2 to 6
- 8% for years 7 to 11
Resale guarantee after 5 and 10 years
As an investor, you have the right to sell your buy-to-let property back after 5 and 10 years at a price of at least 125 and 150% of the original purchase price respectively.
In other words, after five years, you can book at least 25% added value on your property and after ten years, you can realise at least 50% added value.
Read all about it via the link above.
Additional return in the form of benefit in kind
On top of the unprecedented returns, you will also receive a hefty annual payment in kind.
You can enjoy your property free of charge for 4 weeks a year without having to sacrifice return on investment.
Moreover, you can do this whenever you want (high or low season, it doesn’t matter)!
In terms of bonus returns, this can count (going on holiday in a luxury resort in the Limousin region of France is fantastic!).
Interested in this tourist investment property in France?
Then view all the details of buying a second property in France at the Wyndham Halcyon Retreat Golf & Spa Resort now, including photos and videos!
Offer 2 – Recreational real estate as an investment in co-ownership
You can also choose to invest in French recreational real estate via co-ownership. Just like an investment in full ownership (see above), you enjoy increasing returns as an investor:
- 5% for year 1
- 6% for years 2 to 6
- 8% for years 7 to 11
You can also make use of a resale guarantee: minimum 125% and 150% after 5 and 10 years of investment horizon respectively.
You can participate from EUR 17 230.
Ten advantages of buying a hotel room investment
Some hotel chains and property developers offer the opportunity for investors to invest in a hotel room.
Investors worldwide are considering this alternative way of investing. Some of the reasons for this are obvious, others are not.
The ten advantages of buying a hotel room investment are listed below.
Advantage 1 | Relatively high efficiency
An investment in a hotel room can provide better returns than other ‘buy to let’ investments. This is partly due to the thorough cleaning that takes place daily.
Compared to renting out a house, you can be sure that all the furniture and fittings will be maintained. What’s more, the service life of the materials and equipment used is stretched by professional maintenance.
This allows the hotel to offer quality and comfort for a long period of time without having to compromise on the number of visitors.
In this way, a hotel builds a solid reputation. You reap what you sow and this also applies to hoteliers. Building up a good name takes time and effort but the rewards are enormous (also for the investors).
It is like a snowball that does not stop rolling.
Do not underestimate word-of-mouth advertising and customer reviews on websites such as Tripadvisor and Booking! They strengthen or crack a hotel!
Benefit 2 | Stable and diversified income stream
A hotel that has its affairs in order is like a well-oiled machine. Various partner channels, both online and offline, then take care of the visitors and the occupancy rate.
Moreover, a well-located hotel with a stable reputation and honest service can count on a diversified incoming cash flow. Such a hotel can attract different types of visitors. Examples are:
- Families with young children
- Students or pensioners who can visit during the low season
- People travelling on business during the week
- Foreign tourists who want to enjoy a few days or weeks, and
- Visitors from the country who want to enjoy a few days, whether it is a birthday or other special day.
In most cases, when buying a hotel room investment it is possible to then claim a percentage of the hotel’s profits.
Depending on the type of hotel, you can also reap the benefits of additional facilities such as restaurants, spa facilities, bars, paid parking and professional accommodations such as conference rooms, business lounges and meeting rooms.
Depending on the project in question, these may all be the same hotel rooms. This often involves working with a centralised revenue and cost pool.
The remaining profit is then distributed on the basis of a distribution key.
Benefit 3 | Invest without energy when buying a hotel room investment
Do not underestimate the advantage of being a ‘silent’ owner of a hotel room. You are just buying a hotel room investment and that’s where it stops. You don’t have to put energy and effort into your investment.
Everything is arranged for the investors in the hotel rooms.
These include, for example, insurance, arranging bookings, receiving payments, customer service on site and regulatory compliance.
Advantage 4 | Professional management
You don’t have to worry about management and maintenance. The day-to-day operations are the responsibility of professionally trained people.
Examples are cleaning, maintenance of the facilities and marketing and advertising.
Unlike if you were to rent out a property yourself, when you are buying a hotel room investment you will never have to deal with defaulters, damage to the interior, complaints, and so on.
Leadership and staff management also lies entirely with the hotel management team and not with the investors.
Advantage 5 | Surf on an existing brand
Forget the fetish of many investors who focus purely on location. Location is important but there is more (see below for Donald Trump’s advice on this).
You could think of buying a hotel room investment in a boutique hotel. But if you want to increase your chances of financial success, you should choose a well-known and established name in the world of hotel management.
A hotel chain with a name and fame guarantees a professional approach and a good general perception.
A professional party that takes care of the management is what you need to reduce the risk of a financial hangover!
Note: It certainly doesn’t have to be an established value in the highest five-star segment!
For example, the occupancy rate of three and four-star hotels is on average higher than that of five-star hotels. Moreover, these mid-range hotels offer a lower initial investment cost.
Advantage 6 | Relatively low entry cost
The entry cost of buying a hotel room investment is low compared to buying classic residential property. The barrier is low and such investments are accessible to many people!
You don’t have to invest hundreds of thousands of euros to get your share of a well-run hotel!
Advantage 7 | Official documents as with classic real estate
Buying a hotel room investment involves the same legal formalities as buying classic real estate.
The purchase is accompanied by two official documents:
- An official contract of sale, and
- A notarial deed
Depending on the project developer, usufruct and leasehold constructions are also possible.
Advantage 8 | Holiday advantages of buying a hotel room investment
Depending on the hotel project you invest in, you can enjoy discounts as an investor! Buying a hotel room investment can therefore mean that you benefit as a tourist.
This may include discounts that apply to a stay in that particular hotel. But they may also be discounts applicable to stays in other hotels of the same hotel chain.
Benefit 9 | Appropriate hedging against inflation
It was already mentioned in the introduction to this page. Current interest rates are lower than the inflation rate.
This means that everything becomes more expensive at a rate higher than the interest rate on your savings.
In other words, parking money in a traditional savings account will earn you a loss!
Buying a hotel room investment is a nice diversification of your investment portfolio. Moreover, the rental prices of hotel rooms are linked to the inflation level.
If inflation rises, the price of the hotel room can rise more or less in line with it. The hotel operator may always adjust prices upwards, in line with the then-applicable inflation rates.
Advantage 10 | Tax savings
Everything depends on where you are resident and therefore liable to pay tax.
In some cases, you can obtain a nice tax advantage by buying a hotel room investment through financing (a mortgage loan, for example) or through a company.
Everything depends on the situation.
When is it a good time for buying a hotel room investment?
As in all areas and fields of life, there is no such thing as the perfect moment. In general, it can be said that the hotel industry predicts good and stable growth.
These predictions are inextricably linked to the open borders of the European Union and spotty airlines such as Wizzair and Ryanair.
Transport has never been so cheap and flexible and this will only improve in the future.
Disadvantages of buying a hotel room investment
First, it may be more difficult for investors to obtain a mortgage loan for such investment. Many lenders consider hotel rooms somewhat riskier than traditional ‘buy to let’ yield properties.
Secondly, the prices of hotel rooms in the event of a subsequent resale are subject to circumstances. It is assumed that the resale value reflects general property trends.
So in a stable or booming market in a stable economy, this observation is nothing to lose sleep over.
You have a particular problem if you invest in high-risk areas where attacks are commonplace. Think of the once majestic Sharm-el-Sheikh or the ravaged Istanbul.
Thirdly, there may be a decrease in the hotel’s occupancy rate. So when you invest in a hotel room, you are dependent on the market. This market includes the international travel sector but also the economic health of the country and the region in which the hotel is located.
For example, a hotel in a metropolis like London is more attractive than a hotel in Ouagadougou. And so, from an investment perspective, a hotel on the coast is more interesting than one located in an inland region where unemployment is high.
Golden tips from Donald Trump | Buying a hotel room investment
Tip 1 | Nuance of the location
In his bestseller “Trump: The Art of the Deal” thoughtfully dissects real estate mogul Donald Trump’s long-held assertion that the three most important things in real estate are location, location, location.
The book dates back to the golden year 1987, but the advice is certainly still applicable! Thinking of buying a hotel room investment and are still hesitating between different projects? Then be sure to heed the advice of this real estate tycoon…
Trump finds the statement about location somewhat misleading. According to him, location is important but even a good location does not guarantee anything. According to Trump, a good location is the foundation of what could become a fantastic investment.
That is why Trump always invests according to his personal philosophy: “Improve every location”. In concrete terms, he means using creativity, vision and imagination to change the way the site is used.
This is how Donald Trump never invests in vulgar projects! The projects must be special. For example, if he builds a flat block, the building must be the most luxurious, biggest and best in the region.
Buying a hotel room investment is done after examining the existing competition in the region and their pricing.
In conclusion, opting for an established player in the hotel management sector is a smart move. After all, an experienced and professional hotel operator who can rely on an existing brand awareness certainly improves the location of the hotel in question!
Tip 2 | Know your market
Donald Trump is undeniably one of the greatest self-made property tycoons ever. And strange but true, he does not like consultants, magicians with numbers and spreadsheet addicts. Donald Trump invests according to the principle: “Know your market”.
He never employed many statisticians and mathematicians. He does not trust sexy, nicely packaged market surveys. Donald Trump does his own market research and then draws his own conclusions.
In other words, Trump is advising you to follow your instincts after doing your own research.
A good example is the story of Donald Trump and the taxi ride. He took a random taxi and asked the driver to drive with him through an entire neighbourhood looking for potential projects.
Meanwhile, Trump observed the surroundings, the people, the activity and the shops and public buildings in the area.
He also asked many questions of this driver, a man who has been driving around for years. This approach has not done him any harm. Street smarts can only be developed outside school and is at least as important as book smarts.
Buying a hotel room investment seems interesting but you are not convinced yet?
Then go and have a look, talk to the locals, see the activity, check the growth curve of the tourist numbers (available from the national statistical office or from the tourism authority for the country in question), and so on.
Additional information on buying a hotel room investment
On the next two pages you can read more in-depth and related information about investing in real estate [AVAILABLE SOON] and, more specifically, hotel rooms:
- Looking for hotel rooms for sale? Some tips and insights!
Other offers carefree investment in real estate
You can also diversify in terms of security and guarantees. Investing in real estate with rental guarantee [AVAILABLE SOON] is possible.
Such guarantees vary enormously and can be roughly divided into three types:
- Buy a second home in France with a guaranteed return of up to 8% per year and 2 weeks free private use per year. Bonus return: resale at minimum 125% or 150% of the original purchase value after 5 or 10 years respectively.
- Recreational real estate in France as a carefree investment with guaranteed return - you can invest as little as 17 230 Euros, with up to 8% annual return. No free private use but at favourable rate. Bonus return: resale at minimum 125% or 150% of original purchase price after 5 or 10 years respectively.
- Buy a second home on the island of Samos, with free weeks of personal use and contractually guaranteed returns
- Buy a flat on the Costa del Sol [AVAILABLE SOON] including a carefree rental service and returns
- German real estate as investment with security of tenure and low entry costs, including trustee and steward
- Buy-to-let property in Brussels in Woluwe, a real top location that allows for a value-adding real estate investment. Passive investment with 5-6% return if you partly finance with a loan
- Buy a new flat in Brussels [AVAILABLE SOON] in Evere as a passive investment with rental service from A to Z, as from 85 000 Euros own contribution with an annual return of +/- 5,5% (passive investment in Brussels real estate is possible here)
- Invest in Swedish family homes for rent [AVAILABLE SOON] on a beautiful plot of land and with attractive potential gross annual returns
- Buy luxury property in Montenegro with magnificent views and free 6 weeks of private use per year, including rental service by the resort with promising annual returns. 100% personal use is also possible.