February 8, 2024

Behind Closed Doors: The Strategies of Maximising Hospitality Investments

The landscape of hospitality investments faces a new scenario as muted new supply continues to underpin RevPAR (Revenue per Available Room) growth. The persistent barriers of high construction costs and steep interest rates for development financing serve as constraints, impeding the expansion of fresh inventory. In a report of June 2023, provided by JLL (image) the global year-over-year supply growth merely reached 2.9%, showcasing a notable 1.7 percentage points drop compared to figures from 2019.

This landscape, although limited, unveils an intriguing avenue for amplifying profits through ADR (Average Daily Rate). The diminished surge in new offerings presents an opportunity for savvy investors to leverage pricing strategies and elevate revenue streams in an environment where demand potentially outstrips supply.

Cost Discrepancy Driving Opportunities

A particularly interesting trend arises in various markets where the cost-to-acquire property stands lower than the cost-to-build. This discrepancy holds the promise of heightened activity in acquisitions and even potential property conversions. It's a shift that prompts investors to recalibrate their strategies, directing attention towards existing assets and conversion opportunities that promise substantial returns.

Strategic Shift in Investment Focus

The allure of increasing acquisitions and the feasibility of conversions, given the cost dynamics, signals a strategic pivot within the hospitality investment realm. This shift invites investors to navigate a landscape where established properties and conversion ventures become focal points for maximising returns.

Opportunities for Astute Investors

In this evolving investment landscape, astute investors are poised to seize opportunities. Leveraging the current scenario of restrained new supply and exploring avenues like acquisitions and conversions could pave the way for optimised returns and sustained growth in the hospitality investment sphere.

Adaptive Strategies for Future Growth

The year ahead promises an intriguing journey for investors seeking to capitalise on these market dynamics. As the industry recalibrates, those with an eye for adaptive strategies stand to gain from these evolving opportunities, navigating the nuanced terrain of hospitality investments.