The hotel industry is a sector of the hospitality industry that includes businesses that provide accommodation and related services to travelers and guests. Hotels come in various shapes and sizes, ranging from small bed and breakfast establishments to large luxury resorts.
It plays an important role in the global economy, generating significant revenue and providing employment opportunities for millions of people around the world. It is also a key component of the tourism industry, which is a major driver of economic growth in many countries.
Hotel Room Investment
The concept of investing in hotel rooms is comparatively new. Various hotel investment opportunities in the Emirate have increased for interested investors to boost their portfolios. The freedom to invest in hotel rooms globally, including Dubai deserves your attention.
Hotel room investment is defined as a buy-to-let investment in the UAE. Investors buy the unit and have the privilege to let it to the guests in return for a decided payment. Hotels also serve as management by monitoring the procedure for the investor, especially in a hotel apartment investment. This guide aims to share all the relevant terms and steps to secure a hotel room investment in Dubai.
For those seeking a shorter-term, low-risk and high-reward investment, hotel rooms are proving to be the popular choice.
How To Purchase Hotel Apartments for Investment In Dubai?
It is becoming a trend among investors to invest in hotel apartments. As hotels are hardly influenced by the fluctuations in the economy, this is a preferred option by many people.
Hotel investment is typically straightforward and hassle-free as it is managed by a professional team. As an investor, you will enjoy a share in the lucrative revenue, along with a completely serviced, furnished room.
Advantages Of Investing In Dubai Hotels
From the perspective of an investor, the hotel investment in the UAE enables them to have an indirect or hands-off approach to invest. The reason is because an organization will manage and advertise the hotel room on the behalf of the investor. This is how they boost the revenue. The investor is able to reap the benefits from different industry professionals that manage and promote the hotel units on their behalf.
A primary benefit for people that wish to invest in Dubai hotels is that this mode of investment is categorized as commercial instead of residential. This enables the investors to enjoy capitalist growth and tax-free earning.
Resultantly, investors are comparatively less vulnerable to permanent vacancy as opposed to the standard buy-to-let real estate investment that can remain empty for some months.
On average, the returns created via investment in Dubai hotels tends to be higher than buy-to-let real estate investment. A gross yield of 20% can be generated yearly as opposed to the average gross yield of the conventional buy-to-let properties of 10% each year.
The flow of income that has been imposed on the return can boost the overall value of the hotels. Investors in the city are given the freedom to reap the benefits from a valuable establishment that boasts desirable amenities for the guests. This will amplify the probability of gaining a higher return on the investment.
1- Low entry price compared to other investments
The lower cost is perhaps the first thing that will entice you to buy a hotel room. The money you pay to purchase the room would be roughly the equivalent of the deposit you would pay for another type of property. To determine potential monthly payments, down payment amount, interest rates and other essential information for a property you’re interested in, use a mortgage payment calculator.
2- Zero maintenance costs and administrative responsibilities
A hotel room is a hands-free investment because you would not have to lift a finger to keep the property in excellent shape, or be involved in its upkeep in any capacity. The hotel management and staff take care of everything, from repairs and maintenance to dealing with the hotel guests. You simply have to wait to receive your monthly income.
3- Guaranteed income
Once you complete your purchase of the hotel room, no further payments need to be made, and there are no hidden fees. What’s more, you are sure to receive your monthly income regardless of how the hotel room performs.
4- Buy-back option as an exit strategy
As the end of your term approaches, you won’t have to stress over how long it will take you to sell the hotel room and how much you will make from it. Part of the hotel investment contract is the buy-back agreement, which means the hotel will buy the room back from you with assured appreciation of around 15 to 20 percent.
You can also choose to renew the terms so you can continue to earn rental income for several more years.
5- Opportunity to diversify your portfolio
A hotel room makes a refreshing addition to your property portfolio. Houses, apartments and retail spaces are typical investments, so a hotel room can introduce some welcome variety. Also, a hotel room investment allows you to invest across business and property types as well as various geographical locations. This presents a way to protect your investments since you can avoid economic downturns in single locations.
Effective factors on hotel investment success in Dubai
Furthermore, hotel investment decision-making is mainly based on financial, location, and economic factors as real drivers of capital flows between firms. Hotel investments are a great way to diversify your investing portfolio then take serious below item:
One of the best factors that impact the selection of hotel investment in the Emirate is the address. This factor immensely impacts capital growth. Hotels are supposed to appeal overseas and local guests. Resultantly, the development should be in the vicinity of tourist attractions and public transportation links.
Various locations can attract different guests to a hotel. A convenient address offers different perks. For example, if the hotel is situated in the mainland, the address will attract immense investment as they will be able to offer facilities for future inhabitants. This increases the potential to purchase hotel rooms.
A primary aspect that governs the success of a hotel is tourism. The presence of tourist attractions within the surroundings can impact the occupancy rate. Ultimately, investors should do homework on local tourism.
Not only this, they should make noteworthy efforts to boost and promote tourism in the surrounding area. The hotels present in posh areas such as Dubai Marina or Business Bay could reap huge perks for people that prefer hotel investment.
Moreover, the bookings are expected to be coherent without having any particular dependence on tourism. These are great investment offers for interested buyers in the UAE.
Important features of a hotel that can skyrocket the investment usually depend on experienced hotel management companies. These firms prioritize special features such as customer service and service quality. The companies also focus on the available amenities like golf course, swimming pool, spa, and more.
A capable marketing team inside the hotel is necessary to promote the available amenities. Plus, upscale standards and customer service can also increase profitability and customer retention. Real estate investment is a great idea to purchase hotel apartments in Dubai.
Consider investing in Dubai hotel rooms:
If you’re ready to give this a try, securing a hotel room investment in Dubai can be a powerful financial strategy. Dubai is one of the safest cities in the world, it is a continuously growing business and tech hub, and it boasts thriving tourism and hospitality industries.
Many investors are choosing to invest in hotel apartments. After an interested investor purchases the hotel apartment, the hotel management promotes it on their behalf. Guests pay a lucrative amount for spending time at the hotel. The return is split between the investor and the hotel.
All this means that hotels in this part of the world have high occupancy rates thanks to people from across the globe continuously coming here for business and leisure. Investing in rooms in Dubai’s internationally renowned hotels, partnered with trusted real estate developers, offers a rewarding way to earn significant income.