Hotel/Motel Investments

10 Replies

Hello BP!

I was wondering what information experienced investors look for when buying Hotel/motel investments. What information is most important for analyzing these deals? If any investors in this niche could enlighten me I would appreciate it. I am a real estate agent in Arizona and am planning on creating a Hotel/motel database of all the major properties in this state. Knowing what information is most important to investors when looking at this property type will help! 

Thank you!

I am not in this business but am throwing out my two cents worth in since you haven't received any response.  Either a business or the property only can be up for sale.  A Hotel/Motel business is completely  different than a real estate investment business.  A whole different set of skills are required.  Only someone in that business can tell you what to look for when buying that type of property.

It is my guess that most in that business do not frequent this site.  I am sorry that I can't even direct you in the direction you should o.

Good Luck.

Bill

Promotion
Vacasa
Vacation Rental Property Management
We do the work. You get the ROI.
We do it all for your vacation rental. All—marketing, pricing, guest requests, housekeeping & more.
Free income estimate

@Andrew Warner I just searched "motel" on BP and am only finding a few posts from many years back. I'm also analyzing these opportunities. Do you have any leads you'd be willing to share or places for someone looking to move in this direction should look? Thanks in advance!

@Andrew Warner I am a broker in CA with focus on hotel/motel and RE transactions. Also, I grew up in the motel business so know a ton about whar works, what doesn’t, and what to look for. Since not too many looking at this niche ans responding on BP, thought I respond with some view if it helps. Motel business has differences on what makes it attractive to someone. It ranges from wanting a fully managed properties to self managed to owner run. Some owners buy it for the lifestyle of live/work and some purely for investment which means cash flow is important. In this business sustainability of the income against expenses and location are the most important. Beyond that, condition, flag vs. independent, additional income, future growth, PIP vs. reno to increase occupancy are the other things that go into the consideration.

@Purvee K.

Good question...I will stretch it further in this times specifically the motels can be easily converted to studios for single travellers or people who had job but don't have families can survive if think that way ...it's a win win for both purposes

Hey, I have a opportunity Zone hotel project that involves converting a independent property into DoubleTree by Hilton. 20 year Franchise agreement already signed, looking at 27% IRR over 10 years and no capital gains when you exit which would increase your return to well over 30%. Investors want to see STR report and growth in the local economy when looking at the KPIs.

Hello @Andrew Warner :

I have recently decided to change gears and started looking into hotel properties. I have quickly come to learn that hotels are business and real estate combinations. Depending on the size of hotel you are looking at, and flagged/independent, there are a multitude of experiences that follow. While this asset class is much more focus and labor intensive than multifamily apartments, it can be that much more rewarding when done properly. I am in the analysis stage as well where I am looking for properties and making contacts with brokers. Typically I will ask for:

  • The current and last 3 years revenues as well as tax returns
  • P&Ls 
  • If there is a PIP in play or if the Franchise company declared one
  • STR reports
  • RevPar (Revenue Per Available Room)
  • ADR (Average Daily Rate)
  • Break down of expenses 
  • Economic growth in the vicinity 
  • Abilities to increase revenues that the current ownership is not taking advantage of
    • Something like creating contracts with local companies

Over all, with hotel investing there can be tremendous potential for cash flow, tax benefits, natural appreciation, and forced appreciation. One thing to definitely take into account is market timing - which unfortunately it seems as if we are in a sellers market as prices are almost 4x the Gross Revenue and tons of inventory is being added in the market. 

Would love to discuss more and learn from each other!