Investing in hotel residences

by Steve Van Derodar

Photo from Ritz Carlton Bangkok

Ever thought of living in a hotel as your main residence? Why not? In today’s residential accommodation, hotels are a significant player in housing investment albeit a majority of which are for investment purposes. Several of them become the residences of those who are comfortable with the services it provides but first and foremost affording the kind of luxury it begets.

Building development is now a common thing with mixed-use when a hotel caters to residential units on a portion of its structure be it an extension of the hotel vicinity or part of the building structure bearing the same grandeur offering the brand of a hotel. In fact, a 2019 Branded Residences Report by Knight Frank Global Research found that the preferences of the affluent lie in diversifying offerings in the market. Currently, there are over 400 branded residences around the world. Around 30 percent of these are found in Asia.

Hotel-like perks such as concierge, valet parking, and access to the hotel’s swimming pool and spa facilities and housekeeping services are normally offered to residents as well as topnotch 24-hour security and exclusivity. In the Philippines, mostly international brands have catered to clienteles who would reside in hotel entities providing an address akin to luxury, exclusivity, and namesake mostly by international operators.

Hotel-branded residences are serviced properties that allow owners to live in the hotel with access to the same amenities as guests. Moreover, when owners aren’t using their new hotel home, they’re able to rent out their residence through the hotel to offset their ownership cost, which is dependent on the investment offering but not necessarily applicable to all. Different hotels would have varying unit ownership types.

“Hotel-branded residences aren’t a new thing, but in the last few decades, the trend has taken off with hotels brands like Aman, One&Only, Four Seasons, Mandarin Oriental, and Ritz Carlton coming aboard. It’s estimated that there around 400 branded residences worldwide, with not only hotels but other big-name luxury brands entering the mix like Versace, Fendi, and Porsche.”

— Forbes.com

Personally, I am seeing that more investors are getting into the hotel residences investment for reasons of sound investment and as a niche market.

To quote from Forbes.com, “Hotel-branded residences aren’t a new thing, but in the last few decades, the trend has taken off with hotels brands like Aman, One&Only, Four Seasons, Mandarin Oriental, and Ritz Carlton coming aboard. It’s estimated that there around 400 branded residences worldwide, with not only hotels but other big-name luxury brands entering the mix like Versace, Fendi, and Porsche.” The article added, “The lifestyle component of hotel-branded residences is key to buyers’ decisions.” Buyers frequently put a premium on “the status associated with a premium branded address,” along with things like potential for investment returns and the assurance of quality that comes from buying into a lauded luxury hotel.”

Considerably the biggest pro can in hotel investments is the huge increase in property value over a short period of time, especially if you purchase new, pre-construction, or pre-renovation units. Hotel entities are prime due to commercial value and most especially if located in prime addresses. It can create a huge rental income when the unit participates in a hotel’s rental program. Some hotels are also offering investment portfolios at a fractional ownership.

As an example, in Novotel Suites Manila you can either purchase a residential unit or choose to invest in a Fractional Ownership Program. Fractional ownership allows you to purchase a share with Century Acqua Lifestyle Corporation at Novotel Suites Manila so you can enjoy customized luxury vacation stays, multiple vacation destinations worldwide, hassle-free property management, and a steady annual rental income. Using conservative average hotel room rates and occupancy rates in this category, your return of investment in fractional ownership is projected at a 10 to 15 percent** annual yield. Alternatively, The Residences at Novotel Suites Manila are now available for full ownership at pre-turnover rates.

“As an example, in Novotel Suites Manila you can either purchase a residential unit or choose to invest in a Fractional Ownership Program. Fractional ownership allows you to purchase a share with Century Acqua Lifestyle Corporation at Novotel Suites Manila so you can enjoy customized luxury vacation stays, multiple vacation destinations worldwide, hassle-free property management, and a steady annual rental income.”

In college, on a vacation to Hong Kong, I noticed that a friend‘s friend lived in a 5-star hotel, and while we were guests of theirs, I noticed how everything went so easy from booking at hotel restaurants to all the amenities of the hotel. The ultimate sophistication and comfort were very palpable. I could just understand how living in a hotel for some is preferred for what it provides: total convenience and luxury.

There is a market catering to those attracted to hotel residences. You would expect that big cities around the world are aplenty with selections. Additionally, with the tons of advantages in owning a hotel unit, it allows you to get discounts at paid amenities like on-site dining, room-services, spa services and personal training etc. This is just particularly important for some demography.

This may sound luxurious and the truth is only a small percentile of the population are able to afford either owning for residence or as an investment. Still, it is an option for those who believe in the hotel residential value proposition as a model of real estate investment especially on the rental aspect as allowed by hotel residential offering plans.

Overall, hotel ownership and living can be very inviting because of its perks. And whether for end use or investment, it should be all about experience and return of investment.

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(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist to markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at derodarsales@gmail.com.)

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