With the recovery of tourism industry after COVID-19 pandemic, hotel investment has attracted more and more investors’ attention recently. However, hotel investment also faces many risks, like operating risks, policy risks and so on. Investors need to fully consider returns and risks before making decisions.
Hotel investment can bring considerable returns
As analyzed in the provided articles, hotel industry recovered quickly after lockdowns were lifted. The RevPAR of some hotels even reached 110% of 2019 level. Besides, some condotel projects in Phuket can bring 5%-10% rental yields for investors. The returns can be even higher if tourism keeps booming. Therefore, undoubtedly, hotel investment has considerable return potential.
Hotel investment requires large upfront capital
However, hotel investment also has high barriers. As the first article mentioned, Good Hotel invested $32 million on decoration, furniture and equipment. Even for condotels, investors still need considerable upfront payment to purchase property. The high capital requirement poses difficulties for individual investors with limited budget.
Operating risks exist in hotel investment
In addition, there are risks in operating hotels. For example, the occupancy rate and ADR of Good Hotel were just estimations. If the actual data underperforms, the return can be much lower. Besides, condotel owners have limited access to hotel during peak seasons. Therefore, hotel operation risks shouldn’t be ignored.
Policy factors can impact hotel investment
As a capital intensive industry, hotel investment is also vulnerable to policy changes. For example, the pandemic lockdowns had huge negative influence on hotel industry. If similar restrictions come again, hotel investment can face another round of challenges. Investors should watch closely on policy updates.
In conclusion, though hotel investment demonstrates high return potential currently, investors still need to fully consider the capital requirement, operating risks and policy impacts before decision making.