When it comes to investing in hotel properties, hotel real estate, recreational properties, healthcare facilities, senior housing, or sports properties, it is always vital to have leading asset and hotel sales agents like AYRE Estates. For the AYRE team, it has been one of the most important stopovers for investors since 2009. Hotel properties in the right location and with the right operator are among the most profitable and high-performing for hotel investors.
1.) Purchase of leased hotels as an investment with guaranteed profitability
No other type of real estate has generated higher returns on investment over the decades, as hotel properties do in the right locations with the right strategy, the right lease or management contracts, and the right operator. Almost no other form of investment can provide consistent returns of 5%, 6%, 7%, 8% and more from one decade to the next. In addition to this continuous return on investment, the increase in the value of the real estate must also be considered.
A successful investment in hotel real estate is possible for almost any budget. If an investor buys a vacation hotel with a fixed lease indexed at a cost of 2.5 million euros and a yield of 6.5% to 8%, accepts a 'sale-and-lease-back' offer from a hotel chain for 150 million euros and a guaranteed yield of 6.5% for 15 years, or invests in a hotel, leased to an international hotel chain in a major city or capital for 100 million euros and a yield of 4.5% to 6.5%, it depends on the individual preferences and budget of the hotel investor. Talk to one of our hotel agents, we can find the right hotel property for the capital investment of any hotel investor.
2.) Purchase of a hotel property as an investment with self-management
By this, we refer to hotel investors who buy a hotel as a hotel investment/capital investment and operate it with their own staff. Of course, this drastically increases the rate of return, but also the amount of risk involved, as the hotel is run at their own risk.
These buyers tend to have the necessary financial resources and do not require bank financing. They have little or no experience in hotels or asset management and expect a good profit, as well as individual added value. These buyers are mostly self-employed professionals (accountants, lawyers, advisors), or traders from all possible sectors, industrial and family office.
Needless to say, this group of buyers requires a very different type of consulting and support. Our specialized brokers and tourism consultants can prepare documents and information specifically for this target group and take into account all the wishes and requirements of potential hotel buyers/investors. These hotel buyers need special consulting and intensive advice and support, especially in the areas of personnel, control, and benchmarks.
3.) Equity participation in a hotel property operated by the owner with guaranteed yield
To keep your guests returning and achieve good occupancy rates, income, and yields, there is a certain pressure to invest and expand the hotel real estate. New requirements for spas, room facilities and interior design, leisure facilities, hotel ambiance, and common use areas consume high levels of capital. Additionally, the expansion of these facilities also requires more higher-quality hotel rooms and suites, which in turn requires more capital.
To finance these investments without requesting a bank loan, many owners partner with an open market capital investor who provides the necessary capital. These partners can be private investors, family offices, foundations, and perhaps you as well. For many hotel owners, this is the fastest and least complicated way to obtain fresh capital for expansion, quality improvement, restructuring, etc. As an investor, you will be involved in the future of the hotel business, but not specifically in the operation of the hotel. Your investment is safeguarded by the entry of a territorial rate in the property registry or similar.
The hotel owner and operator must ensure that they actually generate and guarantee the agreed rate of return. In exchange for your commitment to invest, you will be guaranteed a certain return on investment that may be fixed or depend on the success of the hotel. It will normally be a combination of the two. This means you will receive a guaranteed return on investment, but you will also benefit from the financial success of the hotel. This model really makes sense in the case of successful hotels, or if you are interested in buying more shares of the hotel.
If you are interested in investing in real estate for hotels or income-generating buildings, sports and leisure properties, or real estate for retirement and health, contact one of our specialized agents at AYRE Estates for hotel and hospitality properties. Let us know your wishes, desires, and requirements, and together we will find the ideal hotel investment for you, combining enjoyment and success!
Information for investors on common types of contracts:
The hotel operator contract: a fundamental criterion for investing in hotel real estate.
Hotels, resorts, and hotel properties are characterized by a certain heterogeneity, which is not only due to differences in categories, number of rooms, location, or facilities. The possibilities by which the owner of the hotel real estate and the hotel operator can regulate their cooperation are equally diverse. When it comes to hotel real estate investments, the hotel operator contract is of particular importance: it determines the distribution of risk between the owner and the hotel operator.
The hotel management contract is crucial to the fundamental nature of investment in real estate. In the national and international hotel landscape, there are essentially two forms of contract chosen for operational contracts: the lease contract or the management contract.
Lease contract for a hotel: passive investment in a hotel property
Hotel leasing represents a passive investment in a hotel property through which the hotel tenant generates income from hotel operations, particularly from its activity as a subtenant of hotel rooms and other facilities, and by providing other hotel services. The real estate investor can only expect sustained success from the investment if the rent guaranteed by the hotel lease contract is accustomed to market conditions and remains so. Therefore, it is especially important to analyze current lease rates and any potential cases of excessive or insufficient lease contract conditions.
Hotel management contract: active management of a hotel property
The hotel management contract, however, represents an active investment, not only is there an active investment in the hotel real estate. This type of investment focuses on the operation of the hotel and all the opportunities and risks involved. The management company acts simply as an "operator" on behalf of the owner. The manager typically receives compensation related to turnover or profits and carries little economic risk, as, with the exception of senior executives, most staff are hired by the hotel property owner.
Hybrid leasing and management contracts are increasing
From hotel leases with fixed lease rates and hotel management contracts where compensation depends on success, there is a wide variety of structural options. In practice, these hybrid forms known as 'hybrid contracts' are becoming increasingly important. Multi-stage models are also common, where, for example, a contract is signed between an owner and an operating company for a lease contract and this operating company maintains a management contract with a brand company.
Tourism experts and tourism consultants from the leading international tourism consultancy, or your hotel agent in AYRE Estates (www.ayreestates.es/contacto) will be happy to provide you with expert advice on selecting the operator contract for your hotel property.
Package of services from AYRE Estates for the purchase, leasing, and investment of real estate in hotels and buildings:
Consulting AYRE Estates:
Advisory in purchase, leasing or search for investment
Selection by country and region
Selection of the appropriate type of hotel / hotel style
Selection of size and category
Selection by purchase price and yield expectations.
Advisory in real estate guidance and future opportunities development.
Advisory about whether the purchase price requested or the the lease amount is appropriate; appraisal of property
Search
Provide balances / business evaluations from recent periods, occupancy rates, renewal requirements and buildings, inventory lists and inventory, property registry extracts, land and building plans, energy efficiency certificates, existing debts and liabilities, etc. and assist with the interpretation of these documents
Operational analysis
Preparation of financial data
Investment cost calculation
Preparation and presentation of future development
Comparative analysis
Strategic consulting from AYRE Estates:
Advising on all investment decisions
Accompanying and advising all aspects of purchase
Development and implementation of negotiation strategies
Structuring transactional processes
Consultation and negotiation of the optimal financing method
Advice on the optimal contract structure
Negotiation of purchase and lease contracts with operators
Preparation and completion of contracts
Appraisals using international standards
Preparation and acquisition work
Preparing exit strategies. Expansion plans.
Hotel software installation, hotel control, staff control, etc.
To receive information on any investment property in our real estate agency, prior client registration, LOI letter*, POF** and fee acknowledgment are required
*LOI, acronym used to shorten the term Letter of Intent, which in Spanish is known as a letter of intent. This document is requested in the pre-contract phase in which the negotiating parties put in writing a number of statements of intent and representations about the principles and rules of the negotiation process.
** POF, acronym used to abbreviate the term Proof of Funds, which in Spanish is translate as: proof of funds, this letter or documentation certifies that an individual, institution, entity, or corporation has sufficient funds (money) to complete a transaction. Generally, a commercial bank or an associated agent issues a POF to provide confidence or security to another party, usually to the selling party, that the person or entity in question has sufficient funds to complete the agreed purchase, subject to signing the POF.
As we are a dynamic and experienced company in large surface assets and we have: hotels, resorts, gas stations, nursing homes, hospitals, clinics, large retail spaces, shopping centers, casinos, land, assets with debt and profitability. We follow an audited procedure.
