Free Resource - The hotel, guesthouse and lodges market

Discussion in 'Hotels, Guest Houses and Lodges' started by totallyproperty, Apr 6, 2016.

  1. totallyproperty

    totallyproperty Administrator Staff Member

    Hotels, guesthouses and lodges

    The key to long-term success in the real estate market is diversification and not putting all of your eggs in one basket. One area of the market that has opened up in recent years is the hotel, guesthouse and lodge sector which is predominantly holiday based but can offer an interesting route to diversification. There are different ways to invest in this particular market such as fractional ownership, joint ventures or full ownership. However, there are many factors to take into consideration when looking at these types of asset.

    Rental yields

    While many would put hotels, guesthouses and lodges all in the same bracket, the potential rental yield can vary significantly between these assets. Hotels tend to have a relatively high cost base and therefore depend upon a high occupancy rate, while guesthouses and lodges may have less overheads but a more hands-on approach. Indeed, the Edinburgh authorities recently announced plans to introduce a tax on daily rates across Edinburgh’s hotels which would impact net returns going forward.

    This is just one example of the need to remain vigilant, watch your local market and ultimately adjust your calculations where required.

    Occupancy rates

    It goes without saying that occupancy rates will vary across individual assets and obviously the higher the rate the better the return. While hotels and guesthouses may have all year round appeal (for business users, seasonal breaks, and special events) many lodges and private holiday lets may struggle to take bookings outside of the main spring / summer holiday season. These potential void periods need to be carefully considered when deciding on your rental pricing. Be aware that the holiday let market often boasts a higher headline rental yield, but perhaps this only relates to 5 or 6 months out of the year.

    If you’re looking to invest in a hotel, guesthouse or lodge (or a share of an asset) you need to research the location, expected occupancy rates and realistic rental yields carefully. You should at least cover your ongoing costs with sufficient headroom to give you a profit and also leave you with liquidity if additional capital is required.

    Cost base

    As we touched on above, hotels generally have a higher cost base than the likes of guesthouses and lodges but they also tend to charge a higher daily rate. Many guesthouses and lodges are effectively owner managed in order to keep costs to a minimum and maintain a hands-on approach. Regular marketing is an ongoing cost with this type of property investment, which is essential in order to attract a high booking rate. However, it does take time to build a reputation which should be a consideration when forecasting future returns.

    Additional income

    One area which is often overlooked by those investing in hotels, guesthouses and lodges is the ability to enhance income by working with local businesses and service providers. Whether these arrangements are on a commission basis or an advertising revenue model there is potential to significantly increase returns. If we look at some of the types of self catering accommodation available it is not difficult to see the potential for additional income from local catering companies, tourist attractions and pamper day providers to name but a few.

    The key to a good return on hotel, guesthouse and lodge investments is not only bringing in additional income but also maintaining relatively low maintenance costs while protecting the reputation of the business.



    Resources



    If you are considering hotel investments, you may also be aware of fractional ownership (which taps into the financial benefits of investing in the hotel market but without the ‘hands-on’ stresses of running a business and employing staff). You can read more about fractional ownership in our dedicated forum: http://www.propertyforum.com/forum/discussions/fractional-ownership-property.379/
     
  2. nmb

    nmb Well-Known Member

    When looking at hotels, guesthouses and lodges you must bear in mind that occupancy rates will never be 100%. Indeed some lodges may oblige you to only rent out your property for a maximum of nine or 10 months each year. As mentioned in the article, one of the best ways to create additional income streams is to partner with local businesses to offer services on which you can be paid a commission. Even though there are management companies who will look after your hotels, guesthouses and lodges there are potentially large cost savings if you are able to manage them yourself.
     
  3. Lee thomas

    Lee thomas New Member

  4. Ali.M2000

    Ali.M2000 New Member

    Has anyone been to a Travel Lodge, I'm thinking of booking a night away in the city and want to get feedback on Travel Lodges in general before I go :)
     
  5. Veronica

    Veronica Administrator

    Depends whether you want more than just a comfy bed and shower. They are very basic, no amenities, although they have vending machines for snacks. If you have heavy luggage they tend not to have lifts so if you are on the first floor or above not fun to get your luggage up the stairs. We have stayed in them at airports occasionally but would not choose them for a city break.
     
  6. diyhelp

    diyhelp Active Member

    I think Travel Lodges are used more as a necessity as opposed to luxury. Business stays yes but not a romantic night away with a partner :)
     
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