View Full Version : Are hotels always more profitable than apartment complexes and what about recessions?

08-08-2015, 12:31 PM
Common sense, along with my own research, would tell you that hotels are much more profitable than apartment complexes. They are the same building, but hotels charge a higher rate and their guests turn over much faster. Are hotels always more profitable? All other factors being the same?

Also, how do these two types of properties act in a recession. People still need a place to live, but not necessarily luxury vacations.

How do apartment rents change as home prices drop and people lose jobs?

08-22-2015, 03:10 PM
Profitability lends itself to how well you control your costs. Hotels aren't always more profitable than apartment buildings. In fact, an argument for apartment buildings is that by having your clients sign long term leases, you have guaranteed income coming in for X months.

Depends, the largest customer base for hotels is probably business travelers, many of which could be in sales. If you're a sales person, recession or boom time chances are you're traveling to sell regardless.

Apartment prices are based on the local market and the number of total apartments available (supply and demand). If there are few open apartments but extreme demand, rents will be extremely high. Take a quick look to see this on the Bakken Oil Fields in North Dakota.

10-31-2019, 03:23 PM
If you’re new to this type of investment, it’s important to understand the pros and cons of real estate crowdfunding before you evaluate any deals.

Real estate crowdfunding's big advantages have made it increasingly popular as a way to invest in real estate. Here are a few of the benefits:

Crowdfunding gives you access to investments you otherwise wouldn’t be able to participate in. Most people don’t have the time, knowledge, or financial flexibility to buy a hotel, renovate it, and sell it at a higher price. Crowdfunding allows you to participate in these kinds of opportunities.
Other passive real estate investments, such as REITs, don't let you invest in individual properties. Crowdfunding deals do.
There's a lot of money to be made on successful crowdfunding deals. At the time of this writing, CrowdStreet lists its completed investments and the lowest actual internal rate of return out of more than a dozen realized investment results is 13%. Returns closer to 20% annualized aren't uncommon. For comparison, the stock market generates annualized returns in the 9–10% range.
Crowdfunded real estate can help you diversify your portfolio. Real estate -- especially the types of projects often funded through CRE platforms -- isn't closely correlated with the stock market. So it's a great way to diversify while maintaining a portfolio with high potential returns.
On the other hand, there are some drawbacks to be aware of:

Crowdfunded real estate deals can be far riskier than investing in REITs, stocks, or other types of investments. Most crowdfunded real estate deals are backed by a single asset, and execution risk is involved in most strategies. For example, a lot of things need to happen if a CRE deal is to renovate an office building and lease it up to 90% occupancy.
CRE deals aren't liquid investments. You can't readily sell your stake in a CRE deal to someone else, and most deals have time frames ranging from 3–7 years. Some can be even longer. Don't consider a CRE deal unless you’re willing to tie that money up for years.
There’s no guarantee that a CRE project will be completed on time. If a deal plans to renovate and sell a hotel in three years and the economy is in a recession, it might make sense to wait longer to sell.
How risky are the project and property type?
Like most investment classes, crowdfunded real estate deals vary in the amount of risk involved. It’s important to get a feel for the risk before you dive into the numbers.

Here are some questions to ask:

How much execution risk is involved in the project? Ground-up development of a new property is riskier than completing a moderate-scale renovation. The complexity of the project is an important factor, and it’s important to be sure the reward potential justifies the risk.
How economically sensitive is the property type? Some types of commercial real estate are cyclical, while others are recession-resistant. For example, a hotel's occupancy and revenue will probably fall significantly during tough economic times. An office building has long leases and isn’t likely to get hit as hard.
Is it already occupied, or does the project’s target return assume it will be leased up? A commercial property that is mostly full of tenants is less risky than one that has high vacancy.

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09-02-2020, 08:17 AM
There is no comparison between a residential and commercial property, because hotels and restaurants have more profitable opportunities like parking, chauffeur services and many more.

02-05-2021, 02:29 PM
I would definitely choose apartments over hotels when it comes to profitability. If there is a recession, there will be less tourists, hence, lesser hotel rentals. - Green Water Technologies (https://www.greenwatertechnologiesprofile.com/)