Reading the news of the picturesque Borrowdale Gates Hotel (pictured) in the Lake District earlier this month, you can read the news piece here, we thought we’d take a closer look at how investment within the hotel and hospitality sector works along with a few considerations for if you are looking to make your hotel most attractive to potential investors.
Why is your proposition different?
In many ways this is a general trick of sales and marketing. Whatever you’re selling, and selling the prospect of your hotel as an investment opportunity is no different, you need to consider why your product or concept is different form the alternatives. Why should investors look at your hotel rather than another? In the case of Borrowdale Gates Hotel, as Fair Tree, the investment company in question noted, they offered comforts of a luxury hotel with the independence of your own apartment” comforts of a luxury hotel with the independence of your own apartment”. This stand out combination was obviously something which the investors didn’t feel they could find elsewhere. Whether there is one unique feature that sets you apart, or a like Borrowdale, a combination, bringing this element out is a vital technique in demonstrating your value.
Whilst the traditional structure of your hotel often bring an attraction for those with historic building or period features, if the technologies or facilities of a hotel are outdated or obsolete this can be something of a deterrent. Depending on the scale of investment, having overheads for infrastructural upgrades or modernisation can weigh on the mind of an investor, who could view this as a barrier. With pressure for investors to be showing value on investment in a short period, payments for modernisation against a monthly balance sheet might mean that it takes a while to post profit. Whilst it might be a large financial outlay, it might also be worth your while reconsidering the use of space and whether you might be able to add additional capacity. From the perspective of potential managers, there’s not an enormous step up in the demands made of an organisation to manage an extra room or two in a small hotel, but the economic demands are significant.
Have a vision of the future
Investment is naturally a forward looking exercise. Don’t just offer the hotel as it stands, but a vision of where the establishment can go. This will need to be backed up with research and figures. Consider whether there might be sources of revenue you’ve not yet explored or whether you have the capacity to shift your focus. For example, as we covered in an earlier article, might it be beneficial to consider taking group bookings if you have the facilities to attract larger groups. Ensuring higher occupation rates depending on the room value can be one way to show advancement in the future. Could the grounds be used for events? Are you making the most of the wedding market opportunities? Could you consider bringing in specialists for a residential course? Thinking in this way is a valuable means to demonstrate vision and can suggest a higher return on investment.
Research your investors
Your investors will have a very thorough impression of you, but you can even the playing field by doing your background reading about their organisation as well. Look at previous investments and learn from those that were successful. Can you pick out a pattern in what they’ve been impressed by previously. Many groups will have their own priorities and specialisations. This creates the opportunity to play up certain elements of your business to them, such as if you share a target audience with previous successful hotels, if you have strong green credentials, or if you have the space for larger conferences and events. Most investment groups of this kind will have a plan that they have seen to work previously, if you can demonstrate that you fit within their template for success then you’re halfway there. If you know that you have a particular hospitality focus then the best approach is to seek out more specialist investors.
Know the trends
JLL predicted that 2017 will be a big year for domestic investment for the hotel industry, with an eye on the USA. Confidence in the sector at an apparent 15 year high, in part due to higher occupancy rates in hotels across the US. This is a picture reflected this side of the pond. As unemployment gradually falls, we see higher levels of spend on tourism domestically this has led to a re-focus on domestic investment- this might be something which dictates the investment groups you contact. Similarly the shift of emphasis to boutique properties in the hotel and hospitality in more recent years has seen investors look to follow the public’s changing preference. Investors will be completely on top of this sort of material, it’s their job after all. Fit your hotel into their picture of where the industry is going.