Types of Commercial Real Estate:(Part 3 of 6) Hotels

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Hotel assets are inextricably tied to the health of the economy. Depending on the hotel type, demand is highly correlated to either business travel or tourism. Hotels are also complex assets to manage, involving high operating costs. The right management team is a crucial driver of performance across a range of metrics, including occupancies and RevPar (revenue per available room). Hotels typically turn their rooms over daily. This requires more work to maintain high levels of occupancy, which may also be subject to seasonal demand trends.

Sub-categories of hotel properties available for investment include:

Full-service hotels: Hotels offering a range of services and amenities like meeting rooms, gyms, spas, and restaurants are full-service hotels. Luxury, upscale, and mid-priced hotels fall under this category.

Limited-service hotels: Budget-friendly hotels that typically do not include restaurants and room service are considered limited service. As such, they have the lowest operating costs among all hotel sub-categories.

Extended-stay hotels: Hotels offering long-term accommodation, with basic amenities like laundry and kitchens, are suitable for extended stays. They typically cater to business travelers or to families relocating between cities.

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