Hotel rooms investment process from the perspective of a hotel owner, hotel operator and individual investor (unit owner)
How it works
Owner develops and constructs a hospitality standalone or mixed-used development.
Units offered for Sale
Owner offers individual units for sale in the market (usually off-plan).
In rental pools, rooms revenues are pooled, and distributions are made across the entire ownership pool. Hotel brands manage the units participating in the rental pool and commercialize them along with the hotel rooms in the system. The rooms revenues flow within the hotel P&L.
The project owner retains the management of the overall hotel building and individual units owners receives income in terms of profits generated by the hotel management company.
The investor is paid a percentage of revenue generated by the hotel management company, typically on a monthly or quarterly basis, based on a distribution formula considering the unit size, potential views, number of bedrooms, etc.
Investors pay a service charge annually
Owner - Operator
Owner enters into a management agreement directly with an operator.
Owner - Investor
At the time of units purchase, the investor enters into a long-term lease agreement with the asset owner (mandatory)
A Homeowners’ Association (HOA) is usually set up to retain ownership of public areas and oversee the collection of dues from unit owners
In rental programs, each unit has its own P&L. In order to ensure fairness among owners of the units, the brands usually implement a priority rotation of units within the same room categories to prevent two very similar units from resulting in vastly different returns.
The brand reserves the right to decide how many units may be placed in the rental program/rental pool according to market demand and to avoid cannibalizing the adjoining hotel.