How Do Hotels Compare To Other Investment Returns?

If you have accumulated significant wealth, then you are likely considering what to do with it. There are many investment opportunities available out there, including things like commodities, stocks, and bonds. However, you might be torn between trying to preserve your wealth while also growing it at the same time. The only real area of investment that can let you do that simultaneously is by investing in properties. Hotels can prove very lucrative opportunities, especially when you compare the potential returns, they provide as compared to other investment returns.

Were you to invest your wealth into the general markets of stocks and bonds, your safest bet would usually be something like an index fund that tracks the entire index you pick? Such funds typically have minimal expenses and fees since they distribute their funds among the whole group of stocks an index follows, with few changes. You’ll be virtually guaranteed to follow the market averages, and that can typically generate 7 to 11 per cent returns in an average year.

Hotels are very different. They can typically generate 16 per cent returns on your investment every year, and that’s after your account for operating expenses such as labour, management, and maintenance.

Given that hotels are commercial properties in high-demand locations, their values tend to remain stable and even rise over time, so your net worth is protected and even grows a bit over time because of this, possibly by a lot. On the other hand, while your net wealth is protected, you also get rental income from hotel investments as guests make reservations and stay in rooms.

Having said all this, that 16 per cent isn’t assured for all hotels, and there can be drastic swings within a single year. Unless a hotel is a convention destination all year long, there might be seasonal swings as the number of visitor’s ebbs and flows. Room rates might have to go up and down to keep vacancy rates low, and certain times of year are certainly going to provide a lot more revenue than others.

Also, if you’re looking at hotels in the UK or mainland Europe nearby, the looming spectre of Brexit can weigh heavily on your decision and considerations. The economics of this region are likely to change quite a bit, but until the formal deal is officially negotiated and implemented, no one can be quite sure how it will affect things.

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