Hotel Investments: Beyond the Price Tag
In the dynamic and ever-evolving world of hotel investments, the real question every investor needs to ask isn't simply "💰 What’s the price?" but rather, "🚀 What’s the potential?" The latter opens the door to uncovering true value and transformative opportunities that might not be immediately obvious.
Over the past few weeks, I’ve been immersed in negotiations on hotel assets, where at first glance, the numbers seemed solid—healthy EBITDA, consistent occupancy rates, and a promising location. However, digging deeper exposed operational cracks that were impacting the property's overall potential. Take one specific case: a hotel with an impressive bottom line but an underperforming restaurant operation that was dragging down its overall profitability. It’s a stark reminder that superficial metrics can sometimes mask deeper, structural issues. Success in this arena lies in looking beyond the façade and understanding the hidden dynamics that truly drive a property’s value.
Here’s what I’ve discovered during this process: the true value of any hotel deal resides in three crucial pillars:
🔍 Operational Strength:
When evaluating operational performance, the key question isn’t just about looking at current numbers but dissecting the story behind them.
Is the revenue sustainable, or are we looking at short-term boosts due to one-off events or seasonal trends?
Are there inefficiencies in areas such as food and beverage operations, staff utilization, or maintenance that, if addressed, could dramatically improve profitability?
Do revenue streams feel diversified and stable, or is there overreliance on one segment, such as corporate travelers or international tourists, which leaves the property vulnerable during downturns?
Understanding these nuances allows you to uncover untapped potential within the property's operational model and refine strategies for maximizing revenue over time.
🚀 Brand Flexibility:
One of the most exciting aspects of hotel investments is the ability to reposition assets strategically.
Could this property thrive with a brand refresh or by transitioning into a more competitive market category (e.g., from mid-tier to upscale)?
What partnerships could elevate its status—introducing a respected franchise brand, for instance, could provide an instant boost in recognition and consumer trust.
Sometimes, a property might be underutilized or tied to an outdated identity. Through strategic repositioning, you could unlock its ability to perform as a leader in its market. With the right branding, an average performer can evolve into a market-leading property, achieving higher RevPAR (revenue per available room) and occupancy.
🤝 Negotiation Balance:
Deals are about much more than agreeing on a price—they require balancing long-term risk, reward, and vision for both the buyer and the seller.
Structuring a deal that includes incentives for future operational benchmarks (like EBITDA growth) can ensure alignment of interests.
Evaluating financing terms and agreements is as critical as evaluating physical property conditions. Is there room for flexibility that could benefit both parties?
For sellers, presenting a property with a solid roadmap for growth post-acquisition makes it more appealing. For buyers, having clarity around post-deal operational improvements can provide confidence in the investment’s trajectory.
Every Challenge Hides an Opportunity
Every hotel asset comes with its unique set of challenges. However, hidden within those challenges are opportunities for innovation and growth. Whether it’s reshaping the operational model, introducing a new target audience, or renegotiating supplier agreements, the focus shouldn’t just be on what the property is today but on what it could become in the future. The ultimate goal is to not just acquire hotels but to sculpt them into stronger, future-proof assets that thrive in an evolving market landscape.
💬 Let’s Open the Conversation:
I’d love to hear your thoughts:
👉 When you’re considering a hotel investment, what weighs most heavily in your decision-making process?
📍 Is location the deciding factor for you, with proximity to major attractions or business hubs being key?
🏨 Do you prioritize brand strength and reputation when evaluating an asset’s long-term appeal?
📈 Are operational metrics like RevPAR, ADR (average daily rate), or EBITDA your main focus?
⚡️ Or do you have unique considerations or strategies that guide your choices?
Ashley Monteiro
Commercial & Hospitality Real Estate Advisor
Broker at RE/MAX Commercial Hotel Advisory
I’d love to hear your thoughts: How are you integrating these trends into your hospitality investments or advising your clients?
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