Own a Hotel Room?

[Hokey Cokey]

Does anyone have any information about owning a Hotel Room? My partner and 3 other members of his family are thinking of investing. The room costs �75,000 and you receive 50% of the money paid by hotel guests. The other 50% goes to the owner of the hotel and is used to pay the staff and the upkeep of the hotel etc. As this is quite a "new thing" we are unsure whether to invest or not. We have already put down �1000 to secure the room and have approx 28 days before any further funds are requested. I have looked on the Internet for any further information but haven't found anything. Please help!!!

[Oneeyedvic]

The immediate trouble I can see is what sort of occupancy does the hotel run at. Why would they rent your room out, when they could equally well rent a room that they own out - keeping 100% of the money.

[oldwoman]

Has he seen this hotel room. There are two at the moment talked about one is �235,000 and the other �175,000 pound .So where is he going for �75,00.

[Hokey Cokey]

Thank you for your comments. The Hotel rooms that you mention for �235,000 I assume are in the south of England, this hotel is in Yorkshire. My partner has had a look at a show room and the plans, and everything is of the highest quality. The hotel will be rated at 4 star. All rooms in the hotel are for sale, ranging from �75,000 - �120,000. The hotel is expecting an occupancy rate of 84% charged at �80.00 per night, of which my partner will receive 50%. He is free to use the room for his own personal use 52 nights of the year. This will be the only 4 star hotel in the city.

[Toureman]

This sounds dodgy, see a solicitor for advice.

[lady_p_gold]

I think I would have looked into it a bit more before I put down �1000 .... is that a deposit in which case could it be part of a contract that you could be held to ? What happens if the hotel chain goes bust, what happens if it doesn't stay as a hotel, are you jointly liable for any mishaps i.e. guests falling over , who pays for the advertising of the hotel and how does anyone hear of it ..... there are a lot of questions !!

[PhilBy]

Wouldn't touch that with a barge pole. What assurance do have that this Hotel does not go belly up within the 1st year? The owner be left with lots of 75 grands & you the investors will be left with empty rooms & I presume a share of the liability for the up keep (of the now empty) building.

[joko]

so its not even built yet???

[WoWo]

Whats the point? The only reason people would let you "invest" in their hotel would be that they cannot raise the finance by traditional means, if they can't raise the finance then that would tell me that their business plan isn't good enough to be backed by a bank.

They are offering the room so that you take on the financial risk of the project not them, if there was no risk they would put 100% of the money in and keep 100% of the profits.

[Catso]

You must be mad! I'm sure there are lots better ways to invest �75k; I'd venture you'd get a better return from the bank, even.

I vaguely remember reading something about 'buying' hotel rooms quite a while ago, but in the US. Apparently it is (or was) more common there. The conclusion was that investors never got the promised returns. Also, it is very difficult to get your capital back, unless you can find another punter to buy it off you.

It's your money though...

[scuzzball]

on the figures given, even if this isn't dodgy, it would take over 7 years before you started to make a profit.

[WoWo]

"on the figures given, even if this isn't dodgy, it would take over 7 years before you started to make a profit."

And even then that would only be if it was booked up constantly the whole year round, in London maybe but I doubt that's likely in Yorkshire.

[bendigedig]

as a reception manager of a hotel i'm confused how this concept would work without being open to corruption - would i be offered backhanders from some room owners to sell their rooms first? most accommodation rates are open to negotiation and its difficult enough going over rates and revenue with one owner let alone hundreds - im sure you'd want to see what your average room rate would be and compare it to other room owners - im going to stop thinking about this now - its giving me a headache just mulling over how the day to day operation would work - nice concept on paper i think.

[Eve]

Difficult to say properly as i don't know the full details but how are you buying the room eg on a lease for a number of years?

I'd strongly suggest taking legal advice on this (make sure it's someone who knows what they are doing, a commercial property lawyer preferably with some kind of experience in this area) especially as to the documentation involved, they will probably be able to stop things that you wouldn't and attempt to make any amendments (although this may be limited if possible as I guess the company will try and enforce the use of standard documentation throughout the hotel but it's worth a try and lets you know where you stand).

A number of other issues spring to mind:

- Make sure you are aware of any other charges which apply such as service charge on account of insurance, repair, maintenance (including for example security systems, lifts, heating systems), services such as heating and other utilities, business rates, laundry, housekeeping such as cleaning and staffing costs, aircon, window cleaning, landscaping, advertising, licensing.

-Who is responsible for repair and maintenance and the costs eg replacing damaged items in the room. Are there any obligations on you for repair and decoration eg have to decorate every so many years. Is it a smoking room?

-Who furnishes the room initially? And who bears the cost?

-Is there any guarantee as to the standard of decoration, furniture, upkeep etc.. in the room and rest of the hotel.

[Eve]

-Responsibility for the rest of the building, the controls on other rooms and common areas, do they have a duty to keep the rest of the hotel in good repair and condition, decoration etc...comply with statutory provisions eg licencing, food hygiene and safety issues, fire safety legislation... Bear in mind that how the rest of the hotel is kept and run can have a huge impact on your investment. Do you have any say or control over these kind of isssues or are you at the mercy of the hotel owners and the staff.

-How do the incentives of your room (eg sea views) differ to other rooms in a competition sense.

-What happens in the event of some event which causes the hotel or room to be unoccupied e.g. a fire, water damage, room is trashed, hotel being shut temporarily or permanently by government bodies e.g. environmental health.

-What if the hotel owners sell to another? What kind of provisions are in place as to who they can sell to etc�

-How many rooms are in the hotel, how much competition for trade is there?

-Have you considered the viability and potential growth of the hotel? Especially as it's new. If it's the only 4* in the area is there a reason why e.g. there may not be the trade to substantiate it. Consider the market and trade e.g. business use, holiday use... consider who the room would be suitable for e.g. single or family occupancy and any restrictions that this may have. For example a single occupancy room may not be as in demand in a tourist location where family rooms are in higher demand and can accommodate different types of guests more flexibly. Consider the location as well and ease of access and possibility of passing trade.

-Is the trade seasonal? Will your income be affected in this way? Do the room rates differ seasonally?

-Consider tax implications.

-Do you any rights of access to business plans, financial info,

[Hokey Cokey]

Thank you for all your comments, especially Jenna1978!! We have asked a lot of the questions already, but there are some good points made that we hadn't thought of. The money paid by the hotel guests is put into a pot and shared out 50% to the manager of the hotel to go towards the running costs, and 50% between all the room owners. Therefore if your room was empty you would still receive an income if the other rooms were occupied. We also have to pay �800 pa to go towards hotel maintenance etc. We know it may take some years to have any return on our money, but the idea was to have a good return on a future investment.