Hotel Room Investment: A Comprehensive FAQ Guide

At GPFG we partner with some of the world’s most renowned hospitality brands to offer property investment. Now, if you are unfamiliar with this concept of buying a hotel room as an investment, we are pleased to provide you with a comprehensive guide to investing in hotel rooms, courtesy of two of our experts - Chad Egan and Mark Reed. Egan and Reed sat down to provide answers to our most popular questions on hotel room investment as an emerging trend in the world of real estate, offering a unique blend of accessibility, profitability, and passive income.

Let’s get started with our basic questions to explain hotel room investment and what to expect when you are looking to invest. We'll also discuss the benefits and factors to consider carefully for your potential investment.

Hotel room investment involves purchasing an individual room within a hotel or resort. "It's like owning a part of the hotel itself," explains Egan. "Investors gain returns based on the room's occupancy and overall hotel performance, and in many ways it’s similar to buying shares in a company."

Since we work with some of the best brands in the world, in our opinion, we would say - Absolutely. Hotel room investing offers a lower entry point compared to other real estate ventures, making it an attractive option for both new and seasoned investors. "It's a balanced mix of risk and reward, with the ability to earn passive income with a focus on long-term gains," adds Reed.

The cost of investing in a hotel room can vary significantly based on location, hotel brand, and room type. We also offer fractional options for purchasing, for those who want to get in at a lower level or buy multiple options for diversification.

“This is a pretty straightforward process,” says Reed. “Upon purchasing a hotel room, you essentially become a part-owner of the hotel. The investor earns a share of the income generated from the room, and what is an added bonus is that it's a hands-off investment where the hotel's management handles operations and maintenance."

Yes, investors can purchase individual hotel rooms. Individual room investment allows for portfolio diversification, and there also flexibility in the types of rooms available for purchase depending on budget and investment goals. And due to the lower price point, investors with a larger investment budget can buy multiple units within a hotel or spread out their investment into different properties or areas.

Investors can indeed buy rooms in hotels, and this has become a popular investment strategy. "It's an excellent way to tap into the hospitality market without the complexities of whole-property ownership," Egan adds. In this way, the hotel brand or owner of the asset can raise funding for the development of the hotel, and they can share in the profits with their investors once the hotel is operational. It’s very much like investing in a company with shares, then receiving dividends on profits.

For us, working with locations in Indonesia, many of our investors in Australia, USA or Europe have concerns because foreigners cannot own property in this country. However, there are fewer restrictions with hotel investment. It's an open market for both local and international investors," says Reed. "It's about choosing the right property in the right location.

For our investors, we see plenty of benefits from buying a hotel room, not just the lower price points, but also lower risks with fewer responsibilities.

Hotel room investment benefits

Hotel room investment offers several advantages:

• Passive Income: Returns are generated from room bookings.
• Lower Risk: Hotels, especially those under renowned brands, tend to be stable investments.
• No Management Hassles: Hotel management handles operations and maintenance.
• Capital Appreciation: Hotels in prime locations often appreciate in value.

Read more in our News Section: It’s a Suite Life! 11 Reasons Why Hotel Rooms Should Be Your Next Investment

Best hotel room investment passive income. "A good ROI in hotel room investment typically ranges between 8-12% annually," states Reed. This can vary based on factors like location, hotel performance, and Market conditions.

That’s the goal, as it should be with any investment. With hotel room investment, the investor starts earning as soon as the hotel is operational and performing above predicted occupancy rates. When forecasting returns, brands will typically use an occupancy rate around 70%. If the hotel performs better than that, particularly in the peak seasons, then returns are higher and everyone wins. Depending on the structure, the returns could be paid quarterly or annually, and the investor can expect that passive income on a regular basis.

As with any investment, investing in a hotel also has risks, such as Market fluctuations and changes in tourism trends. "It's important to invest with reputable brands and in locations with consistent tourism growth," advises Reed.

At Geonet Property & Finance Group, we guide investors through the entire process, from selecting the right hotel to understanding the investment's nuances. We work with a few world-renowned brands to offer investments in popular tourist destinations.

• ELLE Resort & Beach Club – Positioned on the beachfront of Seminyak, ELLE Resort & Beach Club is set to become Bali’s next iconic destination. Backed by global partners ELLE, SONO Hotels & Resorts, and Flight Centre, this development offers 170 branded hotel suites under a 50-year leasehold. Investors gain access to a project combining luxury accommodation with a multi-level beach club that will attract both international travellers and Bali’s lifestyle crowd. With an 8% guaranteed repayment during construction and projected net returns of up to 15% over 10 years, this opportunity highlights the strength of branded resort unit investment in Bali’s thriving hospitality sector.
• The Luc Luxury Hotel & Villas Managed by Tui Blue- Located in the vibrant heart of Berawa, Canggu, The Luc is just 500 meters from both Berawa Beach and the iconic Finns Beach Club, surrounded by the trendiest restaurants and boutiques. This avant-garde mixed-use development sprawls across 8,210 sqm, offering 108 hotel rooms, 14 furnished villas, and 14 premium commercial spaces. Set to open in November 2024, investors can anticipate returns of up to 15% per year, with prices starting at AUD $92,000. Discover more on the GPFG Podcast: Introducing The Luc – The Most Promising Investment in Berawa, Bali.
• Beraban Luxury Lofts: This exquisite lofts in Seminyak, Bali, is built at the most trendy and popular area of the island. You can see our podcast on Watch now - GPFG Podcast: Milestone Alert! Exclusive Beraban Luxury Lofts Construction Update

Read more: ELLE Resort & Beach Club Officially Breaks Ground. Ushering in a New Era of Luxury in Bali

Key factors to consider include:

• Location: A prime location in a tourist hotspot or business hub is crucial.
• Brand Reputation: Investing in hotels managed by reputable brands ensures stability and reliability.
• ROI Potential: Understanding the projected returns and the factors influencing them is vital.
• Legal Aspects: Navigating the legalities of property investment, especially in foreign countries, requires thorough understanding and expert guidance.

Hotel room investments often offer higher yields and require less hands-on management compared to traditional real estate investments. "It's an attractive alternative for those looking for passive income and lower maintenance involvement," Egan adds.

For all hotel investments, it is recommended to know the details of the exit strategy up front. Typically, investors can resell their hotel room investments. "The resale value often depends on the hotel's performance, location, and market conditions at the time of sale," says Reed. Some hotels may also offer a buyback option, which adds a layer of security to the investment.

Hotel room investing is an innovative way to enter the real estate market. With potential for high returns and passive income, it's an option worth considering for a diversified investment portfolio. "For those seeking attractive returns, but low risk in their investment portfolio, hotel room investment is a path worth exploring," concludes Reed.

Contact the GPFG team today if you would like more information on investing in hotels.