Hotel Property Essay

2042 Words9 Pages
Hotel Property “It’s not just property risk it’s business risk – and that’s like having two assets.” (Domestic fund manager – hotel investor) The returns to hotel investment are inextricably linked to local and foreign tourist demand. Therefore the relationship between the hotel industry and the wider tourism industry is two-directional. Without tourists there can be no hotel industry and without hotels there can be no tourism industry. The volatility of the tourism industry is well known and demand for tourism services is particularly sensitive to both price competition and non-predictable shocks such as terror, political unrest and natural disasters. The hotel industry is one of the infrastructural backbones of the tourism industry. It reflects the volatility and sensitivity to demand characteristic of tourism while on the supply side it is particularly 'sticky' in response. Hotel investment demands a long-term perspective and once hotel stock has deteriorated or been taken out of commission it becomes particularly difficult and costly to restore it to its previous state. Although the hotel sector is considered relatively young compared with other traditional property sectors the hotel sector is an important and rapidly growing sector of the property industry. Many participants in the hotel industry consider hotels to be highly complex real estate projects that involve great risk and often consume far too much time, energy and capital. For an investor or owner it is crucial to understand that an investment into a hotel property represents both, an investment into real estate and an investment into a service oriented business. Great uncertainty, an extensive and ever changing array of market segments and high expectations on the part of the parties involved, make hotel real estate more challenging than other types of real estate. However an
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