Why Invest in Mid-Range/Business Hotels?
Mid-range or business hotels are often operated under brands such as Ramada, Holiday Inn, Hilton, Radisson or Sheraton or they may be well-established privately-operated local business hotels with special attributes such as conference centres, huge repeat custom or perfect location for other local facilities.
In the business hotel sector, the critical success factor is choosing a well-known brand where the hotel plugs into a national or international marketing operation to help maximise its occupancy levels and hence its profits. Whilst poorly located and poorly marketed business hotels are susceptible in times of economic slowdown to budget hotels, an alternative critical success factor is selecting a hotel to invest in that offers superb on-site facilities such as conference centres or one next to popular national business or exhibition centres such as, for example, London city centre, Harrogate conference centre, ExCel Docklands, Birmingham ICC etc..
Business hotels also offer the investor a moderate price point per room - these are typically ranging from £120,000-£250,000 per room, at least twice the budget hotel room investment level. Business hotel rooms can offer net yields that vary between 6% for an already-established hotel, up to 8% or greater for a new-build high-quality business hotel.
Reselling business hotel rooms has the benefit of a good quality brand and/or proven income stream and there is an already proven resale market for larger hotel rooms shown by GuestInvest. If purchasing a business hotel room off-plan, then the off-plan construction period is around 1 to 2 years - slower than budget hotels but faster than a full-blown resort complex. City centre located business hotels can achieve optimum occupancy within 1 to 2 years, not dissimilar to budget hotels and much faster than a resort hotel complex.
Even though business hotel rooms are more expensive than budget hotel rooms, investors can gain access to these for just £10-20k invested through syndicates to divide up the cost between several investors. This applies whether purchasing the hotel room investment directly or indirectly through your pension/SIPP.
Providing you are not investing through a pension, many business hotels offer personal usage. This can be very useful if you, or your business, visit a city very often, or alternatively if you often have visitors to your business who need putting up in a hotel. You can benefit from a good investment opportunity as well as minimising hotel costs for your business.
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Online Articles
Newspaper articles on this booming sector
- A budget boom for the hotel market - Mintel
- A room with a view to a profit - Guardian
- After London, buy-to-let hotel rooms go nationwide - Telegraph
- Buy-to-letters check in to room service - Telegraph
- Bed and benefits - Investors Chronicle
- Axa SIPP allows investors to buy hotel rooms - IFAOnline
- Hotel room bug bites Aegon sipp - IFAOnline
