Hotel Investing

In the game of Monopoly, you trade four green houses for one red hotel.

I personally like cashflowing/stabilized properties for the general public as opposed to discretionary items such as class-A luxury apartments or hotel investments.

This may not fit your investment philosophy since this is a high-risk high reward asset class. But if you have a lot of boring class-C or class-B apartment deals and mobile home parks, you might want to invest in a flier with a minority portion of you portfolio.

I see a lot of “dumb” money go into timeshares and some off the wall hotel investments. This drives down the risk-adjusted returns.

The key is finding the exclusive private placements with proven operators.

Hotels are like the Golden State Warriors game strategy of outshooting their opponent. Live by the three, die by the three, is the saying…

 

Much like assisted-living facilities, hotels are as much of an operation play as real estate play.

Strengths:

The mobile workforce are staying more in hotels

In a good market where people are spending money and with dynamic pricing (where the prices surge when there is more demand) you really make a killing on a non-discriminating clientele.

Baby boomers and the population, in general, are traveling more with the internet making things easier.

You are not working with Class D, C, B tenants 😁 No foot stamps, Social Security, Section 8!

Weaknesses:

Airbnb/VRBO emerging asset/operation class is competing on the low end

If the market turns, this asset class does not have the resilience of other investments

Logic aside, who does not want to own a hotel!

 
Hotels are a speculative asset class. Class B and C apartments perform in tough times because everyone needs a place to live. Vacations are a discretionary item on most people’s budget. In good times it outperforms many asset classes because of dynamic pricing, where the prices surge due to demand. Hotel investments have a place in a portfolio after more recession-proof assets are acquired first. – Lane Kawaoka

 

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