I have the good fortune of talking to a 8-hotel owner in white land. He has given me many hours of joy. I am indebted.
Owning a hotel is a sexy idea. So is owning a police station. I am actually tempted to buy a former police station just to show off. Well ... another cute story for another time.
Let's begin the analysis (I am against it, it is too high a capital as well it wouldn't last - Hilton was sold and many others):
- Large capital outlay - Comparing to other property types, each hotel room is expensive to build and own. I am actually sucker for land size. So, a hotel is densely geared, i.e., it has a dense plot ratio compared to other property type. I don't like this because it leaves no quarters to move, i.e., it has already reached its maximum plot ratio usage. The land use is maximum and further improvement is limited. There is no more leeway.
- High manpower needs - Over time, the staff needed to run the hotel is so expensive that a slight mistake would cost the hotel a fortune.
- High plot density - As discussed already with high capital cost. Never invest in maximum cost item. It would clearly return a negative when the economy dives.
- Ultra high land cost - If there is no traffic, no hotel would be built. If there is, then the land cost kills.
- Expensive complimentary services - Some complimentary services are needed to compete for guests. They involve good restaurants, shopping malls, banks and limousine service. In some part, gal services such as pubs and clubs are a must-have.