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  • Holiday Inn Express & Suites Houston South – Pearland by IHG

    Convenient Hotel with nice service

    Perfect hotel for NRG Park, Texas Medical Center (TMC), Hobby Airport, Galveston, Houston, Museum District, Methodist Hospital, MD Anderson, St.Lukes, Memorial Herman, Rice University, University of Houston, TSU, Herman Park, Miller outdoor theater, Pearland Town center.

    Holiday Inn Express     713 434 7373

    13931 South Freeway, Pearland, TX 77047    

  • The hospitality industry’s historical KPIs

    Performance benchmarking is paramount in the hospitality industry, and whether measuring success against yourself, the competition or a specific segment of the market, the process involves foundational historical metrics. 

    This article is part of a series on hotel benchmarking data sets. Reach the other editions here: The role of profitability data in a comprehensive hotel benchmarking experience | Using business on the books in a complete benchmarking approach

    Who uses hotel historical data? How does it support strategies?

    Benchmarking is the foundation of any decision making. If you don’t know where you have been, you don’t know where you are presently and you don’t know where you are heading. Historical data centers you to what is working and where opportunities exist. The utilization of historic data tells any revenue, sales, or marketing strategy where it should be focused and whether a strategy is delivering improved market share over time. Additionally, historic data supports performance management, financial management and stakeholder management decisions and outcomes. In short, there aren’t many industry disciplines that don’t apply historical metrics to their daily functions. For example:

    • General managers use day-of-week splits to gain a holistic view of the market, understand the evolution of market demand, and spot opportunities to drive performance. Also, percentage change in a RevPAR index is used to set bonus targets for department heads.
    • General managers and individual owners work with their revenue manager to set a strategy for segmentation and rate mix.
    • Revenue managers inform their pricing approach based on historical occupancy and competitive market trends. Revenue managers align their forecasts and budgets to market share growth as part of short- and long-term projections. This enables not only a flexible forecasting approach, but a more direct measure of outperformance capability.
    • Ownership representatives assess the competitiveness of their portfolio through multiple performance indices.
    • Finance departments track daily/weekly/monthly changes in performance across all KPIs and their relative impact to profitability.
    • Portfolio representatives evaluate property success, combine historical metrics with forward-looking to approve property pricing strategies, set property budget targets, and measure portfolio competitiveness.
    • Marketing teams build and adjust promotional campaigns based on demand patterns.


    3 key hotel performance indicators (KPIs)

    Hotel benchmarking often involves three key top-line performance metrics: occupancy, average daily rate (ADR) and revenue per available room (RevPAR).

    To better understand the percentage of available rooms sold over a specified period, hoteliers measure their property’s occupancy against their market/competitive set, and in normal times, look at movement through year-over-year changes or comparison against other periods. The formula used to calculate occupancy:

    Like any sellable product, rates are applied to sold rooms/inventory, and the actualized amount paid for a room is known as ADR (Average Daily Rate). This KPI is calculated per the formula below:

    How the 3 KPIs fit in your hotel benchmarking strategy

    The below example compares Hotel X against its competitive set. A competitive set, which is a critical element of benchmarking (first introduced by the STAR Report), is a group of similar hotels that compete with your property for business.

    Please note that competitive set performances are calculated based on the aggregated raw data (supply, demand and revenue) of said set.

    • In terms of occupancy, Hotel X reported 57.6% occupancy in August, which is ahead of the competitive set.
    • To dig further into how Hotel X has performed within its comp set, we would refer to its occupancy ranking index and respective % change to a period.

    Solely looking at your occupancy, you may explain gaps on a daily and monthly basis, your competitive set’s market share compared with your own, and your property’s ability to capture demand. Occupancy isn’t the only goal, however, as cost incurred to hoteliers need to be paid, and ultimately, margins need to be increased. How the competition performs and how you place your property within the marketplace will define the price at which rooms are sold.

    • In this example, Hotel X’s ADR is lower than the aggregated competitive set ($394 for August)
    • Is Hotel X’s higher occupancy because of its lower prices? Does Hotel X keep this strategy in place? Will that strategy drive profit in the long-term?

    As explained above, revenue managers need to capture the overall picture, which is why RevPAR is considered the guiding KPI, being a product of both occupancy and ADR.

    • Hotel X recorded RevPAR of $227, while its competitive set hit $230.90 in August.
    • The stronger ADR performance of the rest of the competitive set has pulled its RevPAR performance upward despite a lower occupancy.
    • To increase its RevPAR relative to the comp set, Hotel X may have to rethink its strategy. Instead of pushing for higher occupancy, there could be more focus on ADR. In that scenario, there could be lower occupancy, but overall performance measured in RevPAR would be higher.

    Key questions and answers

    The past, present and future elements of a comprehensive benchmarking strategy work together to complete the strategic picture. Before looking ahead, hoteliers set a foundation for their approach with answers to key questions based on the recent days, weeks, months and years. 

    • Are you ahead of the competition or can you make gains in occupancy and average daily rate?
    • Which days of week, months or seasons provide opportunity for further growth?
    • How are you tracking to your performance targets relative to market conditions?
    • What are the growth rates of your direct competition?
    • How is performance varying between your competitors and the market?
    • What is your competitor strategy? Growth through occupancy or room rates?
    • What are the underlying factors behind changes in demand and rate? A shift in transient or group demand sources?
    • Is there high enough group demand in your market to facilitate a shift in your marketing strategy?  
    • Did your competition pick up a significant number of contracted nights?
    • What impact is new supply having to the market and competitor set?
    • Are you gaining or losing market share and where might that be happening?
    • What is the impact of historical performance on profitability share and forward performance trends relative to your competitors?

    Data quality matters

    Different sources of data can produce varying levels of quality, accuracy and actionability. That is why we generate historical metrics from raw data sourced directly from hotels. Our industry relationships, built on almost four decades of benchmarking experience, position us to work with more hotels than any other data provider around the world. With data from 80,000 properties in 180 countries, we curate the most relevant, available market data to enable you to compare against your hotel or portfolio.

    We also achieve the highest standards of data confidentiality, security and service. Those standards are met through robust data validation, relationship databases and enhanced property isolation checks. For reference, please see our data guidelines.

  • Hotel Investment Outlook: Smart Strategies for 2024’s Market Growth

    As we enter 2024, the landscape of hotel investments is witnessing a remarkable recovery, signaling a golden era for investors in the hospitality sector. The U.S. commercial real estate hospitality market, having weathered the storm of the COVID-19 pandemic, is now showcasing robust fundamentals that point toward a promising future.

    In the third quarter of 2023, the average price per square foot in the hospitality sector was recorded at $191.78. While this figure is a nod to the sector’s resilience, staying above pre-pandemic levels, it also reflects a moderation from the peaks of 2021 and 2022, suggesting a market that is stabilizing and ripe for investment.

    The capitalization rate, or cap rate, which provides insight into the potential return on investment, stood at an attractive 8.27% in Q3 2023 for the hospitality sector. This is almost 100 basis points higher than many other commercial real estate assets, underscoring the lucrative nature of hotel investments. The forecast indicates a slight increase in cap rates in the upcoming quarters, providing a window of opportunity for investors to enter the market.

    Occupancy rates have also been a key performance indicator to watch. According to Crexi data, the average occupancy rate hovered around 58.77% in Q3 2023. Despite a slight dip from the previous year, this figure demonstrates the enduring demand for hospitality services and the sector’s ability to maintain a steady influx of guests.

    Looking ahead, the growth trajectory of Revenue per Available Room (RevPAR) is expected to moderate, aligning with the anticipated easing of U.S. economic growth. However, with business travel projected to sustain occupancy rates and Average Daily Rates (ADR), the foundational elements of the hospitality market remain strong.

    The CRE market’s adjustment to the new normal has been noteworthy. With strategic investments in handpicked hotels that boast strong operating fundamentals and market alignment, investors can look forward to capitalizing on a sector that’s adjusting, evolving, and promising sustained growth.

    For further insights, explore this analysis on Crexi.

    As we observe these quantitative trends, the narrative they weave is clear: hotel investments stand on solid ground, offering a resilient and rewarding path for those looking to expand their portfolios in 2024 and beyond.

    Interested in exploring hotel investment opportunities? Contact Fort Grp today to schedule a consultation and discover how to add the power of hospitality to your portfolio

  • 5 Things You Should Know About a Hotel Investment

    #1. Variable pricing

    One of the main differences between hotels and other commercial real estate is based on the pricing structure. Regarding hotel operations, the owners typically rent out a hotel room on a daily or nightly basis.

    On the other hand, office, retail and multifamily tenants generally sign leases that range from one year for an apartment to up to 10 years for an office.

    With hotel property, you may see an increase in the cost to book a room during a holiday weekend or if a large local event is happening (concert, sports, etc.), whereas the same room would cost less off-season or even mid-week.

    The hotel’s ability to instantly respond to changes in the local market is a big plus. Hotels are able to adjust daily rates to quickly capture benefits of a tight market or lower the risks of a day or month with lower occupancy.

    This flexibility allows hotel investments the opportunity to benefit from capital improvements and operational enhancements much faster than other sectors. 

    But as quickly as hotel operators can increase rates, they may find the need to lower rates while experiencing market disruptions such as:

    • increased competition
    • weakening in the local economy
    • during a pandemic

    #2. The 5 different hotel categories

    Typically hotels fall into 5 main categories which are defined by the services and amenities they offer. But also keep in mind that the hotel brand may also play a defining role.

    Here’s an overview of each:

    a. Full service

    Luxury hotels and resorts such as Ritz Carlton, Four Seasons, St. Regis and Montage fall into the full service category.

    They’re typically known for providing their guests with a variety of services and amenities such as:

    • spa/fitness center
    • meeting rooms
    • banquet space
    • on-site restaurants/retail

    These hotels heavily depend on their competitive positioning of their amenities and service and also rely on a large staff.

    b. Limited service

    When you think of limited service hotels, these are the Hampton Inn, Comfort Inn, and Holiday Inn Express hotels. 

    Most of these do not have a restaurant but still provide certain services and amenities such as:

    • pool
    • fitness center
    • limited meeting space

    You can expect to encounter a smaller number of staff at these types of hotels.

    c. Select service

    Hotels within this category were created to bridge the widening gap between full and limited service hotel offerings.

    They adhere to the same core principles of Limited service category, though they have a subset of the services and amenities characteristic of a Full-service property such as:

    • a scaled-back restaurant offering
    • banquet facilities

    Examples in this category are Hilton Garden Inn and Courtyard by Marriott Hotel.

    d. Extended stay

    These hotels were designed with longer-term guests in mind such as those needing temporary housing or business travelers on long assignments.

    Most offer larger rooms with access to a kitchen and laundry with discounted rates on longer stays.

    Brands within this category include:

    • Extended Stay America
    • Homewood Suites
    • Embassy Suites

    e. Budget

    Budget hotels are just what they sound like, lower cost lodging for people on a tight budget.

    These hotels offer few services and amenities with the more popular brands are:

    • Super 8
    • Days Inn
    • Travelodge
    • Econolodge 

    #3. Key metrics to understand

    Before considering to invest in the hospitality space, it’s important to be aware of the key performance indicators (KPI) involved.

    The 3 main ones are:

    • Occupancy
    • ADR (average daily rate)
    • RevPAR (revenue per available room)

    a. Occupancy

    The number of rooms that are sold divided by the total number of available rooms is the occupancy rate.

    This measures the utilization of a property’s available capacity.

    b. Average daily rate (ADR)

    Average daily rate (average rate) or ADR is calculated by dividing the total room revenue for all rooms by the number of room actually sold.

    • ADR= Room Revenue/Rooms Sold

    This is especially helpful when assessing pricing levels.  

    c. RevPAR

    RevPAR or revenue per available room is a metric that provides information regarding rooms being sold and how much revenue is being generated from those bookings.

    This helps operators measure their revenue generating performance to accurately price rooms.

    If the RevPAR is increasing, it could mean the average room rate or occupancy rate is increasing – or both.

    To calculate RevPAR, multiply the average daily rate (ADR) by the occupancy rate.

    • RevPAR=ADR x Occupancy Rate

     For example if a hotel is occupied at 80% with an ADR of $100, the RevPAR will be $80.

    RevPAR complements ADR because while ADR only considers the average rate of rooms sold. RevPar takes into consideration the number of rooms that were actually occupied at that rate over a given period.

    Even though operators use daily, weekly, monthly and annual RevPAR trends to see what’s impacting their hotel’s performance, an even better way is to compare the RevPAR over the last year to the RevPAR of competitor hotels.

    This can provide a powerful metric for analyzing the performance and competitiveness of any hotel over a given period.

    In the hotel world, the owners and operators focus a lot on the performance of their “competitive set”.

    This is due to the fact that hotel guests tend to make lodging decisions in real-time and weigh factors such as:

    • service
    • amenities
    • cleanliness
    • location

    Usually their decisions are relative to certain moving demand drivers (events, offices, restaurants, etc.). Join the Passive Investors Circle

    #4. Drivers to hotel real estate success

    Before I invested in the hotel space, I thought the majority of hotel demand was based on the tourism sector. That’s one part of it.

    The other part relies heavily on the business traveler.

    While tourists typically increase weekend and holiday season demand, it’s the business travel that boosts demand Sunday through Thursday.

    Something else to consider is the local market the hotel is located in. Local attractions such as popular venues, universities (LSU!) and waterparks can offer unique demand drivers to their respective markets.

    We love to snow ski and notice that our favorite Colorado resort in Beavercreek experiences peak occupancies during the winter, while hotels near convention centers can expect high demand during key events.

    Another way to help drive top-line revenues is to ensure a quality operating team is in place as  the hotel management team plays a major role in operations. 

    #5. How to get started     

    One of the first steps to take before investing (in any type of real estate) is to figure out whether you want to become an active or passive investor. 

    By doing this, you’ll be able to choose from the main 3 ways to invest below:

    a.  Hotel REITs (real estate investment trust)

    REITs are real estate investments that are an easy method a busy, high-income professional can passively invest in real estate. 

    When investing in a REIT, you’re purchasing stock in a company that invests in commercial real estate. This can be either public or private. 

    Typically REITs specialize in one particular property sector such as:

    • lodging REITs
    • resort REITs

    One of the advantages that attracts investors to this type of investment is you’re able to buy or sell shares at anytime making your money liquid. 

    b. Direct purchase

    As you can imagine, purchasing a hotel yourself would require hundreds of thousands or millions of dollars of capital and a source that would be willing to finance the debt.

    Most professionals would have a hard time with a direct purchase as being an active investor as your main responsibility would be managing the daily operations. 

    c. Syndication

    This option would appeal to the busy professional that wants to focus their time doing what they do best yet still invest in a hotel business.

    Hotel syndications are set up similar to apartment syndications as there’s the sponsor (GP – general partner) and passive investors (LP – limited partner).

    The sponsor (hotel ownership group) are the ones that would identify, purchase and eventually manage all of the hotel operations. 

    As with most syndications, these deals are for accredited investors with an initial investment of $50,000 – $75,000.

    The limited partners simply kick back and receive quarterly distribution checks during the hold period (5-7 years). 

  • 10 Reasons To Invest in Hotels: Why Hotels Are An Excellent Real Estate Investment Right Now

    As you look at the current landscape and wonder about the long-term effects of Covid on the economy, you may be tempted to look up recession-resistant real estate investments and start bolstering your finances for the next big dip. 

    Commercial real estate in general is a great hedge against a potential recession, but in this article, we’ll explore why investing in hotels is an excellent move toward diversification that will also give you a high chance of passive income success during the next economic downturn. 

    First, we’ll start with five things you should know about the US hotel industry – what they’ve implemented over the past two years to improve consumer confidence and retain business, even during the lockdown. 

    Then, we’ll walk together through ten reasons why investing in hotel properties should be at the top of your list, even during times of recession suspicion!

    You’ve had a poor experience in a hotel, haven’t you?
    And I bet you’ve also experienced an excellent hotel visit too! Some of the not-so-obvious reasons for the stark contrast between those two experiences might be brought to light here and make you think twice about expanding your investing horizons toward hotels.

    5 Things Real Estate Investors Should Know About How The Hotel Industry Rose To The Challenge In 2020

    Hotels are different from more traditional commercial real estate categories like multifamily, mobile home parks, and office space because the way they make money is completely different than that of any other category. 

    So, during any economic dip, whether it be limited to the local economy from a negative news story or across the nation due to the recent pandemic, hotel management gets creative about revenue streams, services available to guests, and cost structure. 

    It’s no secret that Covid-19 drastically changed human behavior across the US, and that the decline in travel drastically affected hotels and the travel industry nationwide. But what’s interesting is how the hotel industry adapted to win customers back, provide people peace of mind, and instill travel confidence in consumers.

    Clean Stay Initiatives Were Implemented

    The American Hotel and Lodging Association (AH&LA) was the first to take charge of developing industry-wide hotel cleaning and safety standards, recognizing that the hotel business is largely a human contact business with numerous guest and employee touchpoints. 

    The “Safe Stay” program was created based on CDC standards and has since been implemented across the country. 

    Attractive Packages And Partnerships Were Created

    The operators and asset managers of the travel industries recognized they needed to replace the jobs that were formerly filled by large gatherings and conventions. 

    As a result, they marketed “staycations” with food and beverage offerings to locals and established partnerships with hospitals to accommodate healthcare workers. 

    Many hotels also embraced the concept of working from home, encouraging business travelers to work from their top line rooms while taking advantage of packages including room service and a health or fitness plan.

    Revenue Strategy Got A Makeover

    Revenue managers were forced to evaluate which strategies and marketing techniques really drive income. Discounts, for example, did not result in greater occupancy, but rather a stronger focus on client communication resulted in unrivaled rapport with clients, resulting in return business.

    In 2020, hotel management learned that relying on historical data is no longer enough. When predicting future trends, it’s vital to rely on market intelligence sources rather than historic data. It’s become more essential than ever to understand different market segments, their travel motives, behavior, value perception, and more.

    Existing Spaces Were Reimagined

    Next, hotel owners were required to reimagine what a socially distanced, safe stay would really look like for customers. This led to an unprecedented degree of versatility, reduced contact, and increased technology and convenience being implemented in every nook and cranny possible. 

    Furniture was rearranged, bathrooms were remodeled, and outdoor spaces were revived so that new functions could be carried out in the same physical space. Contactless payments for food orders, laundry services, and check-in/out were all made possible using cutting-edge technology.

    Operating Expenses Were Thinned

    Finally, as I’m sure you can assume, hotels reacted quickly to the decrease in expected travelers by slashing internal expenses wherever possible. 

    Sometimes those choices were easy because cutting costs on fitness center updates, FF&E room upgrades, and designer-inspired furniture observably took the back seat to expenditures on sanitation equipment, air filtration systems, and reconfiguring food and beverage delivery. 

    But sometimes trimming operating expenses was tough, like when deciding whether to furlough or lay off employees, deciding what benefits and severances to provide, and dealing with union issues. 

    By analyzing their contracts with marketers, operators, lenders, and service providers, asset managers were able to reduce expenses. It was critical that they defer payments, avoid fees, waive minimum order or contribution standards, and accommodate to payment strategies in coordination with their industry partners in order for everyone to survive through the downturn.

    Now that hotels across the US have risen to the challenge of facing the Covid-19 Pandemic by implementing these five sweeping adaptations, they are a fresh and relevant lean running machine, ready to weather whatever is on the horizon. 

    The performance of a hotel is not linked to the stock market or other real estate trends, making them an appealing investment right now.

    10 Reasons Hotels Should Be Your Next Real Estate Investment Move

    A hotel is more than a potentially profitable piece of real estate in that it’s an actively functioning (24 hours a day, 7 days a week) operating business with a real estate component. 

    Hotels derive most of their value from the proven ability to generate cash and the potential to increase income. In fact, the hotel’s robust operational nature is one of the primary reasons you want a hotel as a part of your real estate portfolio.

    In a few ways, hotel investment differs from the Big Four commercial real estate asset classes – multifamily, office, industrial, and retail. The operational element adds risk and uncertainty, but it also offers a slew of additional perks that make hotel investing more appealing.

    The following factors are only a starting point for why you should invest in hotels. Any seasoned hotel investor could easily add another ten or more reasons to this list.

    Reason #1 – Nightly Stays

    The majority of a hotel’s income is generated by individuals who rent one or more rooms on a nightly basis. They might require just one night’s lodging or two weeks’ accommodation. Every night is another chance to boost income. The issue comes in optimizing each additional night’s net earnings per room sold.

    The technical success of a hotel is determined by marketing and sales. It’s simple to attract the proper audience by utilizing advertisements and collaborating with nearby activities and convention centers to increase the number of visitors staying at your hotel. The intangible assets, such as loyalty, guest experience, and property culture, are what keep guests talking about their experiences with you and bringing friends back to stay – the most crucial ingredient of any revenue stream.

    Real estate is the first to bounce back from a recession, but it’s also the first to suffer if the economy goes in the opposite direction. To ensure that the hotel can withstand a decrease in demand (like during recent months) and yet remain profitable, an excellent investment opportunity in real estate must be based on strong economic fundamentals.

    Reason #2 – Expense Structure

    The Departmental, Undistributed, and Fixed categories in the USALI standard hotel financial statement distinguish costs into three groups. The profit lines that follow each of these represent varying degrees of control over them.

    The cost of goods sold is a departmental expense. This category covers the costs associated with servicing rooms, offering food and drink services to visitors, and other departmental sales. The majority of these costs are associated with labor, while the remainder is composed of supplies and services.

    Undistributed costs include management, maintenance, sales-related expenses, and other generally required administrative-type costs. Outside goods and service expenses exceed labor costs in this category.

    Fixed expenses are incurred whether or not the hotel is full or profitable. Property taxes, site fees, and energy bills are examples of this category.

    As you can see, these costs increase in “stickiness” as you go down the financial statement. Wages and utilities are examples of expenses that are rather fixed and governed by external market forces, although the majority are subject to negotiation.

    One of the most compelling reasons to invest in hotel real estate is hotel administration can negotiate with providers, reducing operational costs while revenue grows on another track. As revenue rises, the cost to maintain the hotel doesn’t go up drastically, allowing for a healthy profit margin.

    Reason #3 – High Risk-Adjusted Return

    High yield is one of the most frequently cited reasons for real estate investors to invest in hotels. Across the board, hotel cap rates are greater than those of other business real estate assets. They do, however, carry a higher level of risk to manage.

    Any seasoned investment manager understands the risks and is always on the lookout for ways to minimize the downside while increasing the upside.

    The most competent hotel investment managers have considerable knowledge of both hotel operations and hotel asset management, as well as a thorough understanding of how to assist the real estate and operations aspects of the company.

    Reason #4 – Tax Benefits

    If you’re already a real estate investor or have been hanging around for a while, you know that direct real estate ownership is one of the most tax-efficient methods of investing available. 

    The top three advantages of direct property ownership in business real estate are depreciation, equity growth, and tax-deferred exchange. Hotels take these three advantages to another level, as they combine all three of them.

    Through use and deterioration, real estate depreciates in value. So, United States tax law allows investors/owners to apply a depreciation expense schedule over a specified period to offset taxable income. 

    Hotel investments are unique since they incorporate real, personal, and intangible property. As a result, investors do not only get the tax benefits and depreciation limitations for real estate, but also those for personal and intangible property.

    The most significant tax benefit to investors is realized during a cash-out refinance, which is why equity growth is so essential. When cash equity is taken out during debt refinancing and capital paid out to investors, the funds are not taxed at the federal level. 

    So, as part of the business plan, management may make minor changes to a hotel’s operations in order to improve cash flow and provide huge value, allowing investors to benefit from equity without paying tax on it.

    Finally, a 1031 exchange is the hallmark of any successful real estate empire. When you defer capital gains taxes by immediately rolling your funds into another “like-kind” piece of investment real estate, you’re increasing your income potential and centralizing operations into a single, large-scale property.

    Flip four green houses to build a red hotel on your lot, just like in the game of Monopoly, right? 

    Reason #5 – Cost Segregation

    Hotel investments are divided into three categories for tax purposes: building, furnishings, and equipment (FF&E) and goodwill. The first two – buildings and furnishings – are real items. Customer loyalty, employee relations, and other intangible factors that contribute to the hotel’s success are known as goodwill.

    The depreciation periods for the various asset classes are different. Depending on whether current government initiatives are intended to boost specific investments, some subcategories have their own depreciation schedules. Investors in hotels can benefit from bonus depreciation policies that are unavailable in the multifamily, office, industrial, or retail asset classes.

    Cost segregation is a tax deferral strategy that frontloads depreciation deductions into the early years of ownership, which is an important aspect of increasing after-tax income. 

    However, it can also have an important impact on transfer and property taxes.

    In many jurisdictions, real estate investors are required to pay a documentary stamp tax based on the value of the property sold. In many situations, you may separate the intangible assets from the real and personal assets.

    Note 1: Make sure the purchase price allocation and cost segregation values are consistent with your overall tax approach. A single, clear balance sheet will prevent problems between taxing authorities.

    Note 2: Don’t attempt to wing it. For purchase price allocation and cost segregation, get professional tax advice. This is a sophisticated asset management process that requires specialized training.

    Reason #6 – Many Levers for Adding Value

    Hotels’ primary source of value is their core business. Those activities may be enhanced or curtailed to meet demand, trends, the economy, and other factors. This adaptability is one of the finest aspects about investing in hotels. However, there are a plethora of additional elements that influence the final property/investment value.

    The four areas of value enhancement in a hotel are:

    • Capitalization – You make money when you buy, but you also need to ensure the capital stack supports your investment objectives whether that’s through disbursements or profits at the sale (or both!).
    • Renovation – Expectations for hotel interiors, style, and amenities are always changing. In many instances, these are purely aesthetic modifications, but having a management team in place that is committed to keeping up with current trends and design will ensure a steady source of income over the long term.
    • Operations – Hotel management is a people operation. Customer loyalty and employee engagement have a major influence on the ability of an organization to increase revenue and minimize costs. Many of these enhancements are free or inexpensive, but their discovery and implementation are crucial.
    • Contract Positioning – Hotels need a wide range of sales and service contracts with quality operating partners to ensure quality operations. The brand licensing agreement and certain important maintenance agreements might have a significant influence on revenue and profitability.

    An excellent investment manager balances the influence of each of these factors while also determining where each hotel requires the most attention. Even the tiniest value-add feature may improve a hotel’s income, allowing investors to profit from value while multiplying cash flow.

    Reason #7 – Community Impact

    Labor makes up half of hotel running costs. To run a hotel effectively, you’ll need a lot of hands, all of which belong to residents of the local neighborhood.

    Hotels have a significant job-creating impact on the local economy. They not only provide a place for individuals to work, but as a temporary housing solution, they also give shelter to families, business partners, and others in need.

    Full-service hotels provide social and business gatherings space, strongly representing the opportunity to relax and reconnect with those you care about.

    The most successful brands extend the hotel’s ability to create community beyond the confines of their real estate. They are actively involved in developing a community that is consistent with their company beliefs and those of their guests.

    Reason #8 – You Can Experience It

    Although the financial advantages of owning a hotel are obvious, experiencing it is beyond comparison to any other real estate investment.

    Even the simplest limited-service hotel offerings provide a space for guests to move around with very few impediments. They can get in and out of their room, stop by public spaces, and visit amenities with ease. Add a restaurant, meeting space, or a gym to that, and guests’ experiences are instantly amplified. 

    Investments in tangible assets, such as equities, bonds, and commodities, have little real worth. Even many real estate investments are meaningless without the ability to provide cash flow and tax benefits. A hotel is a unique sort of real estate because, by nature, it is a public place that was developed especially for visitors’ convenience and pleasure.

    Reason #9 – It’s Challenging

    As you’re already well aware, investing in commercial real estate isn’t just about cash flow and equity profits. There are many other ways to make money that are considered much less risky than investing in real estate. Most investors do it for the love of the game.

    Hotels represent one of the most challenging asset classes for a real estate investor because every level of investment in hotels – from passive to active – requires tremendous due diligence and a deep understanding of the industry.

    Investors must scrutinize and scrub all factors that impact the operation, especially external, market-related factors. As big as the hotel investment industry is, it still represents less than three percent of the total commercial real estate square footage in the United States. 

    The major players all know and respect each other because they understand how difficult it is to consistently perform at the top of their game.

    Reason #10 – It’s Cool

    The best reason to do anything is because you love it. But if you can look good while doing it, that’s just a big bonus.

    Plainly stated, investing in hotels is cool.

    When you invest in a hotel, you’re making a high-profile investment into a beautiful property that sees lots of visitors, but you’re also gaining invisible accolades. 

    Investors who primarily keep their cash in the Big Four CRE categories have respect for hotel investors that continually pump out great investment returns because they know how much energy it takes to break into the hotel asset class and execute at a high level.

    Also, how fun would it be to go visit and experience a stay in a hotel of which you’re part owner?!

    The ability to welcome your family and friends into a hospitality environment is very rewarding. You spent time building your investment portfolio, carefully selecting real estate investments that support your financial goals, and you want to share an experience in one of your investments with the people you love. That is difficult in many investments, but a hotel is a public space built for just that – sharing.

    Why Invest In Hotels NOW?

    We believe the hotel industry has adapted and grown more resilient and innovative during the recent crisis, and that the changes implemented within the industry are paving the way for exceptional returns during the recovery of the travel industry as a whole.

    Some of the best advice we’ve ever heard was to try to anticipate the next best move before the masses jump on board. Investing in hotel real estate syndications is this right now – people are nervous to travel, but a few brave souls are already venturing out to explore.

    Meanwhile, since hotel revenues have hit a historic low over the past 18 months and commercial property value is based on how much income they make, hotel real estate is essentially “on-sale” right now.

    By the time the travel industry is roaring again, I want ownership in a piece of it. Of course, nothing is guaranteed, and real estate IS a risky investment, but I’m looking forward to riding the travel trend wave as it grows back to pre-pandemic levels.

    How Do I Start Investing In Hotel Real Estate?

    My favorite, most hands-off way to invest in real estate is through real estate syndications, which are basically group investments where we all throw money in a pot together to buy large commercial assets (like hotels). Lucky for you, inside the Fort Grp Passive Investors Circle, we present pre-vetted opportunities that already have our stamp of approval to investors. 

    This means we’ve already explored the business plan, checked out the financials, looked at the property, and vetted the sponsor team so that we can confidently present real estate investment opportunities to investors just like you!

    Once you’ve identified your investing goals and are confident you have capital that can remain invested for about five years, you’re ready to start reviewing deals and finding one that supports your cash flow or equity appreciation needs. 

    Jump inside the Fort Grp Passive Investors Circle and keep your eyes peeled for the next real estate syndication investment opportunity!

  • Investing in Real Estate vs. the Stock Market

    Investing in Real Estate vs. the Stock Market

    Investing in Real Estate vs. the Stock Market

    Of the two types of investing, investing in stocks and shares seems on the surface to be more accessible to many than the world of property investment.

    So, why would you consider investing in real estate?

    Both types of investment have their pros and cons but the beauty of investing in property lies in the low risk, stability, and predictability of the investment.

    When you add incredible tax advantages, hedge against inflation and control of investment to the list of positives then choosing to invest in tangible bricks and mortar over stocks and shares makes much more sense.

    Let’s take a brief look at some of the pros and cons.

    Stocks and Shares – Positives and Negatives

    Negatives

    1. Volatility

    During a dip in the economy, you may be subject to the disappointment of diminishing funds as the profitability of the company drops.

    Stock prices experience extreme short-term volatility, depending on the day’s events. Most smart traders do not react to these volatile market cycles but take a long term approach; however, the unpredictability of stocks can take its toll emotionally.

    2. Risk

    Stocks are volatile by nature because they depend greatly not only on the economy but also on the performance of a company and more importantly on the performance of the flawed individuals that run those companies.

    If a company goes bankrupt then the money that you have invested in those stocks is completely dissolved.

    This is a bigger risk than many are willing to take; many investors prefer to have their capital tied up in an investment over which they have a greater degree of control.

    Negative publicity can also affect stock prices unexpectedly and in this day and age of instant news and of fake news, the volatility goes through the roof.

    For example, on January 29, 2013, Audience ($ADNC), a voice processing company, found itself in muddy waters, literally, after a Twitter account named @MuddyWaters published a tweet about a false report in which the company was being investigated by the Department of Justice. The tweet set the company’s stock into a 25% drop. Muddy Water’s published a tweet after, clarifying the hoax.

    1. Ambiguity

    Accurate stock analysis calls for a great deal of study. Even many honest experts admit that they are barely scratching the surface when it comes to accurate in-depth analysis.

    When you invest in stocks you effectively own a portion of the company that you are investing in. If that company manages to thrive then the value of your stock rises and you win. When the company struggles, you lose.

    Positives

    1. Passive Income

    The entire process of investing in stocks can be automated.

    Of course, when it comes to investing in property, you don’t have to be the one dealing with tenants’ problems. When you invest in a property deal that is syndicated by someone else then this means that your real estate investment income will effectively also be 100% passive. You are several steps removed from the day to day management of the property.

    2. Liquidity

    Buying and selling stock is a relatively straightforward and speedy process with low transaction costs. No tangible asset is being exchanged so the transaction is quick and inexpensive. The process of actually buying and selling stocks is obviously much more straightforward than buying and selling a property which often takes two or three months or more.

    3. Diversification

    Due to the relative ease of buying and selling stocks, it stands to reason that it would also be fairly simple to spread your capital across different stocks. This is a way to combat the volatility of the stock market where the prices of individual stocks fluctuate daily. Clearly, it would take a much greater investment of capital to diversify your real estate portfolio in the same way.

    Real Estate – Positives and Negatives

    Real estate is a tangible asset and as such for many investors, feels more real. A great appeal of this type of investment is its stability.

    For many millions of people, this kind of investment has generated consistent wealth and long-term appreciation.

    Real estate investment provides a very consistent and stable rental income. Having a home is a vital necessity for all people, and as a result, rental investors are relatively protected even during economic downturns.

    Negatives

    1. Lack of liquidity

    With property, you can’t just sell it at the end of the trading day. You can’t go back on your decision to invest in a property at the click of a key on your keyboard.

    It may be necessary to hold the property for several years to realize the anticipated big returns.

    It’s interesting to note however, that most stocks dividend yields hover around 4% or less annually.  When you invest in a multifamily real estate deal, you start receiving income almost immediately. Investors are getting distribution checks every month from rental income and routinely the average annual returns even after fees, inflation and taxes, are above 10%.

    2. Lack of diversification

    If you’re putting all of your money into real estate you might be limiting your diversification.

    In contrast, with stocks, by means of an index or mutual fund, you can have easy diversification.

    However, diversification can be achieved in real estate investing; well-qualified advisors can help you to spread your investments across different communities and different types of property.

    This is another advantage of syndication.

    3. Transaction Costs

    As we have seen, stock trading has much lower transaction costs than real estate.

    Real estate is a longer-term investment and transferring property is expensive. There are title fees, attorney fees, agent commissions, transfer taxes, inspections, and appraisal costs.

    Real estate is a tangible asset and as such for many investors, feels more real. A great appeal of this type of investment is its stability.

    For many millions of people, this kind of investment has generated consistent wealth and long-term appreciation.

    Real estate investment provides a very consistent and stable rental income. Having a home is a vital necessity for all people, and as a result, rental investors are relatively protected even during economic downturns.

    Positives

    1. Cash Flow

    Property investment provides an opportunity to invest for cash flow which means buying a rental property for the income it generates each month.

    With skillful management, this cash flow income can be increased significantly after your investment.

    The passive income from your real estate investments can dramatically improve your quality of life.

    Rental properties give a steady source of cash that keeps up with inflation.

    With smart investment advice, real estate investing will bring a consistent stream of passive income.

    Many investors are often able to earn cash flow completely tax-free.

    2. Tax Advantages

    The government gives many tax advantages to those that effectively help them with their responsibility to provide suitable housing for the populace. Owning real estate brings many tax advantages, not least of which is depreciation.

    Depreciation is a key tax advantage with real estate investment.

    Real estate investors earn back the cost of depreciation over a period of time after the initial purchase.

    Because you are depreciating an asset that increases in value, you receive a tax credit accordingly.

    This tax credit is received in addition to property maintenance and other costs that you can take away from the rental income you receive.

    When you add in ‘bonus depreciation’ and ‘1031 Exchange,’ the tax advantages are truly extraordinary.

    3. Hedge against Inflation

    Depending on the type of securities you hold, Inflation can be problematic. Real estate investing serves as a hedge against inflation. The value of the property is tied to inflation as replacement cost goes up and the rent of the tenant is adjusted upward.

    Summary

    Investing in commercial real estate (CRE) properties brings excellent returns with low volatility and many other financial advantages.

    A great advantage of investing through syndicates rather than making a self-directed investment is that you get to leverage the investment company’s expertise. 

    With a syndicator, you can bank on the knowledge and skills of several real estate professionals. 

    Many investors don’t have the time or inclination to learn every aspect of owning and managing real estate investment, for example, negotiating purchase agreements, financing a purchase, negotiating leases and managing the property.

    We look forward to supporting you in your desire to expand your wealth and reach your goal of financial freedom by means of CRE investment.