There are many excellent investments in the area of commercial real estate. At no particular time, many successful real estate investors consider adding a hotel to their commercial real estate portfolios. As in most commercial real estate investments, owner involvement is limited after acquisition to being a landlord and usually that is through a property management company.
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. A Hotel owner acquires not only a 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 imprve 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.
Motel Reservation
Hotel Operations
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.
In majority of commercial property management contracts, operational expenses are paid by the tenants. In this industry, most operational expenses are paid by the owner. The owner of a hotel property must decide whether to operate independently or affiliate with a franchisor. The most common way to operate a hotel is as a franchise. The major reasons for franchise affiliation are brand name recognition, advertising and possibly the most important, a franchisee has access to the franchises national or international reservation system.
You are now an Employer
A hotel owner/operator becomes an employer, subject to complex federal and state laws regulating and governing employment issues.
Food and Beverage license
Many hotel properties rely on the significant share of profits generated by food and beverage service.
In summary, hotels are a commercial real estate investment as well as a real business. Investors, even those with years of experience in commercial real estate, should consult with knowledgeable professionals before committing to purchasing a hotel.
Thinking of Investing in a Hotel?
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