The hotel industry can be a profitable business venture even for first-time investors! They can be a particularly attractive proposition in some specific market segments, like boutique hotels.
If one of your goals for the new year is to explore potential business opportunities, now is a great time to consider the US hotel industry sector.
An investor’s overview of the hotel industry
According to recent statistics, in 2018 the US hotel industry generated revenues of $200 billion, and was expected to keep growing at annual rates of approximately 6%.
While they only account for a small percentage of the total US hotel industry, boutique hotels are showing superior performance levels. With the exciting growth in the Boutique hotel industry, this might be the right option for you.
Boutique hotels deliver personalized and unique experiences that result in high occupancy and Average Daily Rates (ADR) rates. An increasing number of new boutique hotel brands are being established across the US.
If you are looking to invest in a hotel, ADR rates are the most common way of achieving return on investment on boutique hotel properties.
How does the future look?
Looking at the 2019 projections for the boutique hotel industry, it’s reasonable to expect continued growth.
By contrast, this index may decline in the US hotel industry as a whole, suggesting that investing in boutique hotels is a safer bet. Boutique-lifestyle brands are gaining the most attention in the hotel industry making them a good option for you.
There are, however, certain things for you to consider:
- You will need to research current market conditions, consumer confidence indexes, industry trends, statistics on building and renovation costs, and financing options available – in particular, loan-to-value ratios.
- Make sure you are clear on your investment time frame. Lifestyle and boutique hotels are best suited to 3-5 year investment horizons.
- Full service catered hotels carry a higher degree of complexity and may not be the best option for first-time investors. On this note, you should be aware of the connection between average gross operating profits and the food and beverage services offered by boutique hotels. Non-catered boutique properties can have the highest gross operating profits.
- Not all boutique hotels are created equal. Researchers at professional associations and realtors have identified six major categories of boutique hotels, but the best performing are Legacy Brands/Lower-Priced, Upper Scale Brands, and Boutique-Lifestyle Brands/Luxury properties.
These are only a few of the many considerations that come into play when deciding on a boutique hotel investment. You will need to conduct thorough research in order to make an educated decision.
To sum up, the US hotel industry is a potentially lucrative investment option in 2019, and this is particularly true of boutique hotels. Of course, this is a significant commitment, so make sure you’re armed with up-to-date information and plan ahead of time to maximize your chances of success.
Author: Bruce Hakutizwi, USA and International Accounts Manager for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses. Bruce has over 7 years’ experience working within the US business transfer marketplace connecting buyers and sellers.