Investment in sales-type hotels (including living accommodations) is generally made with the expectation that it is a small investment and high rental income (profit from consignment operation). However, no matter how small the investment, the proportion of the investment amount to the investor's assets is not small. This is because among the investors who invest in pre-sale hotels, there are a significant number of people who invest for the purpose of preparing for retirement and helping their families with stable profits. In addition, since many investors are investing for the first time in real estate other than housing, investing in a pre-sale hotel must be done with caution and a thorough examination of whether the goal can be achieved. Accordingly, we would like to look into investment points for sales-type hotels.
01 Location of the hotel
When it comes to accommodations, location is really important. Even if it is near an airport or a tourist attraction, it is difficult to attract guests if there are no convenient or recreational facilities in the nearby area. In this case, hotel operators are forced to lower room prices to attract guests, which poses a fatal risk to investors' returns. The answer can be found by looking at why Korea's luxury hotels are located in Jongno or Jung-gu. In particular, foreign tourists have a stronger desire to experience Korean culture than to enjoy Korea's beautiful scenery.
02 Room size and facilities
Accommodation business is not aimed at one-time business or one-time guests. Especially these days, when there are many people around the world who are active on social media and the influence of famous influencers and YouTubers has increased, the room size, auxiliary facilities, and services that make up a hotel are very important. From the perspective of a company supplying a sales-type hotel, in a situation where it has no choice but to build a limited number of buildings on limited land, it will have no choice but to reduce the size of the rooms and build with minimal auxiliary facilities in order to sell out quickly and maximize sales profits. . This is suitable from the perspective of a sales-type hotel implementation company, but it can be a factor that makes hotel operation difficult and can act as an impediment to achieving the goals of investors.
03 Operating company
Accommodation facilities are facilities that operate for tourists. However, hotel operation is not simple. Hotel sales must be operated systematically and efficiently by a group of experts to achieve business results. Also, the hotel brand is very important. Even if it is not the Marriott, Hyatt, or Banyan Tree that we know, having a brand that has some level of recognition is helpful for sales. Recently, Korean brands have also been active aggressively. Before purchasing a property, you must find out who operates the hotel and what brand it operates under. If it is simply operated by a developer or architectural company, or if it is operated by a company that cannot even verify corporate information, investment decisions need to be made more carefully.
04 Return on Investment
The return on investment must be predictable and achievable. Not all accommodation facilities are doing well.
Sales-type hotel supply companies have no choice but to offer high rates of return. Otherwise, sales will fail. However, investors often do not know whether it is possible or impossible to achieve that rate of return. In this case, investors have to sell their feet and hands. You should closely research the room prices and business status of other hotels in the area where the hotel is located and compare and analyze them with the investment hotel. Realization of return on investment is closely related to the sales and operational capabilities of the hotel operator.
05 Sale price, resale profit, and long-term repair deposit
The sale price of a sale-type hotel is bound to be high. A sales-type hotel supply company must make the maximum sales profit, so a sales price below the market price cannot exist. However, if an appropriate profit relative to the sale price is guaranteed in a stable and long-term manner, the investment will not fail. Resale profit is a very difficult story. This is because, even if an appropriate profit is generated compared to the selling price, the selling price must be higher than the selling price in order to realize a resale profit at the time of sale. However, if the profit remains the same and the selling price increases, the profit rate will naturally drop, and it is difficult for new investors to appear despite this. Of course, it is possible if hotel operations are active and profitability increases within a certain period of time, but it is not easy. In addition, due to the nature of lodging facilities, they are facilities used by many people, so at some point, there will inevitably come a time for building repairs, remodeling, replacement of fixtures, etc. There must also be a preparedness plan for who will bear the burden in such cases. Typically, a professional hotel operator manages the building necessary for business, but the building owners bear the burden of repairing building defects or remodeling. Before purchasing a property, it is a good idea to ask the seller how long-term repairs are covered and judge the investment based on the seller's response.
When investing in a sales-type hotel, make sure to thoroughly consider at least the five items above before making an investment decision.
