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Investing in Eco-Luxury Hotels: A Promising Opportunity for Impact and Real Estate Investors

By: Evan A. Shields

At Anura, we believe that hospitality investing, particularly the development of new eco-luxury hotels, can present impact and real estate investors alike a solid risk-adjusted return. 

Don’t just take our word for it. HVS, one of hospitality’s leading service providers, recently released a hotel development cost survey providing some back-up intelligence and thought leadership on this. In this month’s newsletter, we summarize some of the core takeaways of this report for prospective capital partners.

Hotel Industry Booms Amidst Rising Costs

The hotel industry is experiencing a robust resurgence, with occupancy rates and average daily rates (ADR) surpassing pre-COVID-19 pandemic levels. This surge in demand presents a golden opportunity for investors and developers looking to capitalize on the growing market.

While the industry is thriving, it’s essential to acknowledge the challenges posed by rising development costs. Factors such as labor shortages, supply chain disruptions, and inflation have contributed to increased construction expenses. However, these challenges are not insurmountable. In fact, they can present unique opportunities for savvy investors partnering with groups like Anura that mitigate risk along the way.

Why Invest in Hotels Now?

• Strong Demand: The pent-up demand for travel is driving occupancy rates to new heights, ensuring consistent revenue streams for hotel properties. HVS found national occupancy rates reached 62.7% by the end of 2022, 62.9% by year-end 2023, and are on track to break records in 2024.
• Increased ADR: Travelers are willing to spend more on accommodations, leading to higher room rates and increased profitability. ADR increased by nearly 4% across the U.S. from $149 in 2022 to $155 in 2023. Luxury, full-service offerings can also confidently command top of market ADRs.
• Limited Supply: The challenges of rising construction costs and supply chain disruptions have slowed down new hotel development, creating a limited supply and driving up property values. Firms with streamlined labor and insurance can mitigate some of the effects of recent construction cost increases.

Investment Opportunities to Consider:

• Revamp Existing Properties: Older hotels can be transformed into modern, boutique accommodations to attract a new clientele and command premium rates.
• Target Underserved Markets: Identify emerging destinations or niche markets with high growth potential and limited competition.
• Explore Alternative Hotel Concepts: Consider investing in unique hotel concepts such as extended-stay properties, wellness retreats, or eco-friendly accommodations.
• Leverage Technology: Embrace technology to enhance guest experiences, increase operational efficiency, and gather valuable data for strategic decision-making.

Mitigating Risks and Maximizing Returns:

While the hotel industry presents exciting investment prospects, it’s essential to approach with a strategic mindset. Investors should partner with Sponsors, like Anura, that conduct thorough market research, partner with experienced operators, and diversify the investment portfolio to mitigate risks across the board.

By carefully selecting properties, implementing effective management strategies, and staying informed about industry trends, we believe investors can capitalize on the hotel industry’s resurgence and build a profitable portfolio.

To learn more please contact Spotlight Family Office Group at Info@SpotlightFamilyOffice.com.