The concept of purchasing hotel rooms as a form of property investment has gained traction in recent years, offering individuals the opportunity to own a segment of the hospitality industry without the complexities of full-scale hotel management.
This model allows investors to buy individual rooms within a hotel, earning income generated from guest stays.
When you purchase a hotel room, you acquire a leasehold interest in that specific unit.
The hotel management handles daily operations, maintenance, and bookings, while you, as the owner, receive a portion of the revenue.
Ben Whitaker, Senior Investment Consultant at Alesco Property, told The London Property News, “Looking for a low-cost real estate investment route? Buying a hotel room may be just the ticket.”
This arrangement provides a hands-off investment opportunity, combining real estate ownership with the potential for regular income.
Property Investor Today provided further insight and said that “hotel room investments are much cheaper than typical buy-to-let properties, with rooms starting from around £50,000, depending on location and size.”
Benefits of hotel room ownership
- Lower entry point: Investing in a hotel room typically requires less capital compared to purchasing an entire property. Prices can start from around £50,000, depending on the hotel’s location and room specifications.
- Passive income: With the hotel’s management team overseeing operations, investors can enjoy a steady income stream without the responsibilities associated with traditional buy-to-let properties.
- Access to amenities: Some investment agreements offer owners personal use of the room for a set number of days annually, along with access to the hotel’s facilities.
What you should consider before investing
- Location and demand: The hotel’s location significantly influences occupancy rates and, consequently, your returns. Hotels in prime tourist destinations or business hubs tend to perform better, says Ivorystone.
- Revenue sharing and fees: Understand the revenue split between you and the hotel management, and be aware of any associated fees that may impact your net income.
- Exit strategy: Some investments come with a ‘buy-back’ option after a certain period, typically between 5 to 10 years, allowing you to exit the investment with potential capital appreciation.
TLPN readers shared their experiences
We asked The London Property News readers to share their experiences from investing in hotel rooms.
Sarah, a 45-year-old investor from Manchester, shares her experience: “Investing in a hotel room in a popular seaside town has provided me with a steady income stream. The hotel’s management handles everything, making it a hassle-free investment.”
James, a retiree from London, adds: “I purchased a room in a business hotel near the city centre. The returns have been consistent, and I enjoy complimentary stays, which is a nice perk.”