28/02/2023
One of the growing trends popular with new investors in the “sharing economy” is owning hotel suites. This trend is a result of the travel halt, due to covid-19, followed by the surge in tourism after travel restrictions were lifted. You might have noticed how increasingly difficult it has become to get reasonable air fare. Similarly, hotel rates are increasing with demand. Perhaps not great for consumers, but for investors, this is where opportunities in the hotel industry present itself -- leveraging the post-covid tourism industry.
As the demand for hotel bookings surge, hotel average daily rates increase. To put it into perspective, let’s look at a popular resort area in Thailand, as an example. Investors can own Ramada brand resort hotel suites from approximately USD $16K at 25% ownership up to $80K for 100%. Owning a suite means that you can visit when you want, and when you are not using it, if you want to earn passive income, Ramada will rent it out to generate income of between 9% to 12% yield.
Income varies depending on the hotel’s average daily rate (ADR). Pre-covid, ADR sat around 5.43%. Then during covid, it sat at zero. Now, because hotel bookings are surging, in the example of Thai hotels, ADR is closer to 10% and rising. The accelerated ADR is also tied to valuation. As the value of your suite increases you would be able to sell it at a higher price than you bought it for.
Look for a location with nearby attractions such as a theme park, golf courses, and other activities for the entire family. An airport should not be more than an hour and a half away. Being close to a major city is something to watch for as well. In case international borders close again, you’ll know that the hotel will continue to profit from visitors from the nearby cities.
Keep an eye on this trend before it levels out. The higher the occupancy rate, the more hotels can charge, which means a higher annual daily rate, the higher your rental income as an investor.
For more info contact Greig on +27(0)63 3641780 or email [email protected]