Investment in hotels and hotel rooms is still seen by many investors as one of the safest and most reliable ways of putting capital in bricks and mortar, and seeing a return that outstrips pretty much everything else in the sector. Shared risk, multiple income streams, and solid returns are the key things that hotel investors look for. But one of the major bonuses is that hotels simply don’t have the same degree of emotional aggravation that comes with residential buy-to-let. Nor do politicians have hotel developers in their sights, quite simply because there would be little point, politically, in attacking businesses that contribute hugely to the tourist economy, and create jobs in the process.
While holiday home buy-to-let arguably performs a similar function to hotels, it’s far more likely to attract negative attention (and does), because it’s still seen as taking valuable stock away from the domestic property market. Hotels don’t have this problem. In addition, given the relatively buoyant—if slightly uncertain—economy in the UK right now, combined with a weaker pound, the hotel sector is in rude health, especially outside of the capital. While London has suffered weaker demand (largely as a result of Brexit and several recent terrorist attacks) the provinces have experienced impressive growth. And the silver lining with Brexit, of course, is the devalued pound, which has made the UK a more affordable and therefore more attractive tourist destination for foreigners and domestic holidaymakers.
Check out the stats
A recent report from PwC states:
‘The regional hotel sector is still a growth story… For 2017, despite the forecast economic slowdown we expect 2.3% RevPAR. An increase in “Staycations” for domestic travel, attempts by the UK to boost tourism to the regions and the attraction of a weak pound to international leisure travellers will boost some cities. In fact, despite some high active room pipelines hoteliers are telling us that Manchester, Edinburgh and Birmingham will be star performers in 2017. Glasgow, Cardiff and Liverpool are also expected to do well. We forecast occupancy to hit a record 77% and remain there in 2017. In 2017 the price of a room in a regional hotel could hit £70 in nominal terms.’
In the face of uncertainty, what every investor wants is the promise of a good cash flow. With governments tinkering with policy to try and shape the housing market by driving amateur buy-to-let landlords out, new opportunities are being noted. But not all opportunities are created equal. And often to truly see the benefits of one opportunity over the other, one has to dig beneath the shiny veneer of good marketing, and delve into the detail of the digits. Does the investment stack up from the nose to the tail of the deal? Right now, buy-to-let investors have been frightened out of the market by the government’s harsh measures. Some have turned to holiday homes, but there are great opportunities in hotel investments that require less upfront capital, and that deliver a yield from day one. So, while buy-to-let landlords, lenders, the Bank of England, councils, and politicians play a convoluted game of chess in which residential properties form the pieces, why not consider other simpler, more straightforward options that bypass all of the unpleasantness.
An investment built to last
Solid, sensible hotel investments can deliver good, reliable income streams and equity gains for investors, especially those keen to diversify. We, at Shepherd Cox, along with more than 150 existing business partners buy hotels that make money from day one. There’s no sitting around waiting for the investment to make sense, it simply starts producing a return straight off the bat. Why not get in touch today and find out how to start making an 8-10% return from the moment you invest?