Undervalued assets
Opportunity to create value with a hotel investment often comes in the form of an acquisition that requires renovation, repositioning or adaptive reuse. Hotels may be purchased for a relatively low price if they are under performing. If the hotel’s performance improves once renovated and/or repositioned, the value of the asset increases commensurately. The work that goes into changing the property is part of what the owner contributes to the value of the asset.
Repositioning a hotel involves buying a property that is outdated or no longer optimum for its market and turning it into an asset that has more value to its customers and to you, the owner. Advantages to repositioning, as opposed to new development, can be substantial. The building exists, so the initial aspects of development from site prep to zoning are already done. It is generally a simpler job to contract a renovation than to build a new construction hotel. Repositioning a hotel may also enable you to get into a market where there are barriers to entry, like very little available undeveloped land. Repositioning should come with the opportunity to buy at a discount and benefit from the upside of introducing a like-new hotel.