Tips for the Prospective Hotel Investor

An entrepreneur and investor in hotels, Bharat Lall, MD, serves as president and CEO of Pinnacle Hotels. Under Dr. Bharat Lall’s leadership, Pinnacle Hotels has secured affiliation with all major U.S. hotel chains and has built a portfolio of nine hotels with a combined 1,500 rooms.

Hotels and motels can lead to a significant return on capital for savvy investors. The first step for investors is to identify their target niche and select investment property based on this decision. For example, investors may be looking to gain a market share in upscale hotels, which historically have been more resistant to economic changes because of the relative stability of the business travel market. Other investors may be looking to cater to the extended-stay customer, whose purchasing activity is tied to commerce in the area.

Regardless of niche, hotel investors must carefully analyze economic predictions, such as the hotel’s revenue per available room (RevPAR). Calculated by multiplying average guest rate by occupancy rate, or by dividing total revenue by room count and occupancy days, this data set predicts the property’s income. Investors should also look at risk and return potential, which depend largely on the property’s location and its potential market. Finally, an analysis of current trends in the hotel industry gives investors a general sense of potential investment performance.

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