Facebook
CALL +44 (0) 161 337 3890
Currency (GBP)
AED  AUD  BGN  BRL  CAD  CHF  CNY  CZK  DKK  EUR  GBP  HKD  HRK  HUF  IDR  ILS  INR  JPY  KRW  KWD  MXN  MYR  NOK  NZD  PHP  PLN  RUB  SEK  SGD  THB  TRY  USD  ZAR 
Language

A guide to investing in hotels

An investment into a hotel room is often seen as another form of a buy-to-let investment, with numerous very short-term tenants throughout the year. The general consensus of a hotel room investment would be that an investor purchases a hotel room, and the hotel then let the room out to hotel guests, generating rental returns for the hotel room owner.

Property investors see investing into hotel rooms as a great alternative investment opportunity that brings diversity into their portfolio as well as providing returns that can be better than mainstream property investments.

Why Hotel Rooms?

An attractive aspect of hotel room investing is that hotel rooms require a lower initial investment than other types of investment, and given the current climate, more and more investors are reluctant to invest larger amounts into one property.

As well as being able to generate higher returns than other commercial property investments, hotel rooms are often managed mainly by the hotel, providing investors with a hands-off investment that will require minimal work and expenses going forward, particularly with the typical stamp duty surcharge for investments not applying to hotel room investments.

Niche assets such as hotel rooms have become increasingly popular over recent years, with higher returns and the chance to diversify a portfolio two of the main reasons as to why this type of investment is such a hit. According to Savills, there were £8.1 billion of hotel room transactions in 2015, representing a significant increase from £6.1 billion in the previous year.

Ownership of a Hotel Room

The way in which a hotel room investment works is to firstly determine whether the investment will include having full ownership or fractional ownership of the room. After deciding upon a hotel and agreeing to buy a unit, a deposit will be paid by the investor and the room is taken off of the market. As is the same with buying another property such as a house, contracts are created, reviewed and then exchanged for the investor to take ownership of the hotel room. After completing the buying process, the room will then be subleased back to the hotel for guests to occupy it, generating the rental income.

The option to take fractional ownership of a unit within a hotel provides investors with a lot of the same benefits as having full ownership, scaled down compared to the share that the investor has in the ownership of the room. The returns generated by the room and the benefits associated with ownership of it are proportionally similar to full ownership of the.

Investing in a Hotel Room

A hotel may seek to sell a room or a selection of rooms rather than keep ownership of them, mainly when the hotel are looking to fund the development process or to recoup some of their initial outlay for the development. Therefore, many rooms can be purchased off-plan, which brings obvious risks that aren’t associated with hotels that have already been built before the time of your purchase.

One issue that may be of concern to investors is the resale of the hotel room as the concept of buying a fraction or the entire hotel suite is quite new, even to seasoned investors. As their rise to prominence has only been recent and more focused on new developments rather than existing hotels, investors may have reservations about purchasing this type of investment.

With this in mind, many developers include a 100% guaranteed buy back scheme which usually applies a number of years into the investment and which gives investors the confidence and assurance that they have a clear exit strategy, should they want to cash in on their investment.

Contact Our Investment Team

Call us on +44 (0) 161 337 3890 or Contact Us using the form below

  • I would like to receive future updates from Hopwood House regarding investment opportunities and other services.

    For details on how we handle your data please view our Privacy Policy

Glossary of Terms

Our glossary of terms contains a comprehensive guide to various property investment related terms to give you a better understanding of the language and terminology used when talking about investing in property.

Find out More

Mortgages

Looking for a buy to let mortgage? Find out more about buy-to-let mortgages to see how much you can borrow, the cost of the repayments and browse our latest mortgage offers.

Find out More

Looking to sell?

Are you looking to sell your investment property? The team at Hopwood House can help you sell your investment property and can handle the process from start to finish.

Find out More

As Seen On

Partner Logos

As Seen On