To Buy Hotel Rooms Or Not to Buy Hotel Rooms?

In recent years, experienced hotel and resort developers have been offering private investors the chance to invest in hotel rooms on a buy to let basis. Of course, the idea that you can buy hotel rooms sounds glamorous but how do buy to let hotel developments compare with traditional overseas property investments? If you’re thinking about investing in property overseas then there are probably a few things on your wish list. A manageable investment level, a hands off project, an excellent return on investment and possibly a magical destination that you’ll want to visit year after year will all be important.

Of course, with the current economic climate, you’ll also want a secure and safe investment that is likely to ride out the property downturn.

It’s not that surprising then that one of the more recent features of the overseas property market – buy to let hotel rooms – is continuing to grow despite the doom and gloom elsewhere. All but unheard just a decade ago, the opportunity to buy hotel rooms is often seen as a perfect way for private investors to limit their personal exposure while still enjoying both the income benefits and potential capital growth of buy to let property investment.

So what, exactly, do you have to do to buy hotel rooms?

Buying a hotel suite is not that different to traditional buy to let property investments. A hotel developer will sell a number of rooms, suites and apartments within the hotel to private investors. As business travelers and tourists book the rooms, the developer pays out a percentage of the room rates back to the investors.

Investors who buy hotel suites get a ‘hands off’ investment where an experienced hotel management team handle everything from marketing to maintenance. Financially, buy to let hotel developments can deliver both capital appreciation and regular income with returns in the region of 10%+ from income alone being regularly achieved. Of course, when you buy hotel rooms there’s always an added bonus to consider – free and discounted stays in a high-end hotel.

So how do they compare with other overseas property investments? Buy to let hotel developments can help minimise risk.

The way in which hotel developments offset individual risk is one of the biggest attractions for investors keen to buy hotel rooms. Buying an overseas property to let out brings with it one big risk – not being able to let the apartment or villa you buy. When you buy hotel rooms, the returns are not based on the particular suite you purchase but rather the success of the entire hotel. An occupancy rate of just 50 – 60% would normally be enough to deliver a solid return on a buy to let hotel room.

You can buy hotel rooms as part of a SIPP or other personal pension investment.

Usually when you buy hotel rooms, one of the perks is free or heavily discounted stays at the hotel. If you don’t need personal use of the hotel though, buy to let hotel rooms can be perfect for buying via self-invested personal pensions (SIPPs). If you buy hotel rooms through a SIPP you will benefit from tax free capital growth and earnings. In fact, your SIPP can own an individual hotel room or even share in several through a syndicated arrangement.

Many people buy hotel rooms for a hassle free investment.

From fixing the broken toilet to choosing the curtains, traditional buy to let investment properties come with their own set of headaches. Investors usually get around this by paying for a management company to keep an eye on things and take bookings. With buy to let hotel room investments, everything from marketing to maintenance is a part of the package from the start. Experienced hotel management companies ensure the highest quality standards in everything from customer care to the furnishings in the rooms.

Buy to let hotel rooms offer a solid return on your investment.

As the last 12 months have shown, investing in property can be a harrowing experience. Falling property prices have created the ultimate buyers market, but unfortunately, no one can be sure when, or even if, property price increases will return to their pre-crisis strength. An overseas property today could actually fall in value before things get better.

This is perhaps the biggest reason for the rise in popularity of buy to let hotel rooms. The option to buy a hotel room should be considered less of an investment in property and more of an investment in the tourism of the region – with the benefits of property appreciation thrown in for good measure. Even as overseas tourist numbers ebb, the growing number of people taking their holidays in their home country tends to pick up a lot of the slack. High-end hotels also benefit from the conventions, conferences, weddings and other events that they host throughout the year.

No investment is free from risk, but for people considering an overseas property investment, buying a hotel room could offer just the right balance between reduced risk and potential for growth.