Bhavik Dani Featured on Midland Media: Podcast

1 min read

Earlier this month, our very own Dealflow Officer Bhavik Dani lent his hotel crowdfunding expertise to Midland IRA, on their Midland Media: Podcast Series. Bhavik goes in depth about how hotel crowdfunding distinguishes itself from other real estate investment opportunities, and also discusses our team’s journey so far on the road to making hotel crowdfunding accessible to investors across the nation!

Check out the full podcast here.

Interested in learning more about hotel investments and EquityRoots’ hotel crowdfunding platform? Click below!

EquityRoots - Hotel Real Estate Investments Platform

 

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Introduction to Crowdfunding

3 min read

Hi. I’m Bhavik Dani, Dealflow Organizer with EquityRoots.com. It’s my pleasure to talk to you about how crowdfunding is revolutionizing the hotel industry. EquityRoots.com uses crowdfunding as a finance mechanism to raise capital for real estate assets, specifically for premium branded franchised hotels. EquityRoots combines and harnesses the buying power of the crowd to bring you investment opportunities in institutional grade investments that were once available only to REITs, insurance companies, and the largest corporations. Our crowdfunding technology allows even the smallest of investors to pool their capital right next to proven developers and industry leaders. Hotel crowdfunding is really a system in which everyday folks like you and I become the source of capital. The capital can be structured as equity, debt, mezzanine debt, and sometimes even convertible debt. This capital is fairly flexible with how a developer can use it to further grow and improve business, from renovating a pre-existing hotel development to constructing and designing an entirely new development from scratch.  The advantages of crowdfunding to investors include:

Diversifying Risk

We can diversify risk by allowing the crowd to buy fractional interests in different hotels across the country. EquityRoots allows investors to select multiple assets, affiliated with different brands and located in various geographic territories.

Institutional Grade Assets

Next, it allow hotel investors to own a piece of an institutional grade quality hotel. Let me explain a little further. The average hotel groups and hospitality groups have the ability to build a standard 80-120 room hotel in a suburb, where barriers to entry and construction costs are often lower. However, in center city urban markets – like Chicago and New York – investors often encounter high barriers to entry and substantially higher construction costs. Deals in such markets can become out-of-reach for traditional hoteliers and real estate investors. This is where crowdfunding kicks in. By pooling capital from everyone, it allows combined leverage of the crowd to pursue a higher-grade, higher-quality deal. It’s something usually reserved for institutions –  REITs and insurance companies as I mentioned.

No Middleman and Commissions

Another advantage is removing middlemen and commissions. The crowdfunding process is very clean and simple. Our crowdfunding platform doesn’t allow broker fees or commissions for buying and selling the investment. EquityRoots aims to make every penny of your dollar count in the investment.

 

EquityRoots - Hotel Real Estate Investments Platform

Ownership Beyond Paper

Investing in property and buildings that you can see and visit is probably one last advantage I’d like to share. Hotel crowdfunding investments are markedly different than paper stocks and bonds – paper certificates that we trade on by speculation and can never actually “see” in the same sense that you can see and visit a hotel you invest in. Real estate is an investment that you’ll always be able to see. It has real property interest and improvements on the land.

Conclusion

These are just a handful of the reasons why hotel crowdfunding is such a game changer – not only does it harness the power of real estate crowdfunding, but it also allows real estate investors new and old to gain access to those high-barrier markets. EquityRoots is hotel crowdfunding, democratized for today’s investors.

 

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Our Limitations on Funding

2 min read

To ensure quality, EquityRoots has a few limits on our funding policies.

What are our limitations on funding?

Many times we get inquiries about what types of deals EquityRoots.com funds. We fund a variety of deals: opportunistic turnarounds, acquisitions, new developments. However, we do have some qualifying criteria to ensure that our hotel investors have the highest quality crowdfunding projects available to them. All projects must be franchised with one of the big three brands. This includes Marriott, Hilton, and IHG. Why is it that we are only picking these three? It’s not to say that other properties and other franchises do not make money or are that they are poor investments. These properties do have the potential to perform well and earn returns, but the three big brands that EquityRoots has identified have proven track records of customer service, brand standards, and a sense of predictability that corporate travelers have come to expect. It’s the hotel brands that we feel comfortable investing behind and sharing to our hotel investors on our hotel crowdfunding platform. They have strong brand support that includes a robust central reservation system working to fill your guest rooms each night.

EquityRoots.com also likes to look at the type of transaction. New development hotel projects from the ground up tend to have longer planning times and disposition periods, but they also tend to draw in higher revenue than a comparable pre-existing hotel upon stabilization.  It’s no secret that new hotels often become market leaders, but hotel investors must endure 18-24 months of deferred returns during planning and construction.

Alternatively, existing asset acquisitions are also an attractive proposition because you’re ready to recognize a return on your hotel investment the day after closing.  Existing stabilized assets also allow hotel investors to see exactly the income that they’re buying, whereas new development deals are based on projections.

 

EquityRoots - Hotel Real Estate Investments Platform

Are there any dollar amount limits on funding?

In short – no. Traditionally, potential real estate investor bases are often limited by their location. EquityRoots’ platform allows sponsors to reach a larger investor base, using technology to enhance how they source capital. A Hampton Inn in New York City will have no problems raising capital online. It’s strong brand and larger sized market will allow this project to draw not only local investors in New York, but also investors from outside New York State. Our technology department focuses on effective quality search algorithms to make sure that investment opportunities are available to local investors. Interested hotel investors that may be researching how and where to invest in hotels online may find themselves directed to EquityRoots.com’s platform. You don’t have to live near an asset to perform due diligence and invest. With that said, we would expect the New York City Hampton Inn would raise quite a bit more capital than a La Quinta Inn in Albuquerque, New Mexico.

Looking beyond the deal itself

Oftentimes, the sponsor behind a hotel crowdfunding deal matters just as much as the merits and location of the deal itself. Although we don’t set funding limits, we often push project sponsors to contribute at least 50% equity, requiring them to share a significant stake in the success of the project.  This way, both passive hotel investors and project sponsors both share a mutual, financially backed interest in the success of the deal. Other factors matter too, and we look at each submitted project holistically before presenting the hotel crowdfunding opportunity to our hotel investors. In general, the better the flag, brand, sponsor, and market size – typically improve the outcome on the capital raise.

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My Home Away from Home — How Brand Loyalty Affects Hotel Industry Investments

by Kernisha Padilla 

 

I was recently asked to attend a conference in another state and was given the choice of hotels with a per diem limit. I was ecstatic at the thought. Why? Well I finally had the freedom to stay at the hotel of my choosing, which means I was looking for a place where I was most comfortable; in essence— a place that could be my home away from home.

 

My Home Away from Home — How Brand Loyalty Affects Hotel Industry Investments

 

We all have preferences in life and we stay loyal to certain brands, regardless of the array of options available to us.  Not only do we do this with choice of hotels, but everyday items as well. Take a moment and think about your choices for grocery stores, the toothpaste you used this morning, the coffee you drink and the type of computer you’re reading this from. All brand choices no doubt, which means we all are subjected to a sense of brand loyalty that manifests in numerous ways.  Brand loyalty is real and plays a key role in our everyday thinking. Our choices are often so engaged with brand loyalty and we do it so consistently that we often forget we are even making such choices anymore.

Ultimately brand loyalty was the motivating factor when I made my conference hotel choice. It came down to the top three hotel groupsMarriott, Hilton and IHG (Intercontinental Hotel Group). As far as the hotel industry is concerned, brand loyalty is one of the greatest driving forces behind the industry’s success. Marriott, Hilton and IHG marketing principles and driving forces towards increasing their brand loyalty is commendable. The reasoning is obvious; a large and loyal customer base yields an increase in profits for each of the hotel groups. Success through the expansion and growth of their assets and guest loyalty is a must for the hotel industry in today’s ever-expanding market.

 

 

EquityRoots - Hotel Real Estate Investments Platform

 

 

Brand Loyalty— What is it?

 

Brand loyalty is a surprisingly easy concept to understand. It is the extent of the faithfulness of consumers to a particular brand that is expressed through their repeat purchases and occurs irrespective of the competing brands. The choice of a brand in essence becomes less based on logic and rationale and becomes more of a go-to decision.
Taking a look at the hotel industry, brand loyalty is often supported by key factors that attract their customers and following. The availability of a wide range of hotels at different price points, and in different segments, all throughout the world means that hotel brands are looking to foster a deeper connection with their guest and cater to all of their personalized needs. Most travelers are seeking hotels that provide a good combination of key amenities, such as free internet and hot breakfast combined with a consistent quality standard. Expanding upon this, hotel owners have added the use of loyalty or membership programs to keep their customers coming back.

 

Why does brand loyalty matter?

 

The mere sheath of availability of the top three hotel groups alone means that there are approximately 10,000 hotels that have a large loyal customer base. Out of these 10,000 hotels, Marriott alone has 19 brands with approximately 4,500 properties in 87 countries worldwide and hundreds more in the development pipeline.  The long awaited acquisition of Starwood Hotels by Marriott will officially make them the largest Brand, with the largest brand loyalty following. Hilton offers over 13 brands, totaling 570 properties across 6 continents. IHG has over 5,000 properties through 12 brands across 100 countries. If the vastness and potential of the hotels to attract such a loyal customer base doesn’t attract you to learn more about brand loyalty I am not sure what will. Think about it. Each of these hotel brands has to invest such a large amount of resources, time and strategy in building protocols unique to each of its brands, positioning it to capture different market segments and different types of travelers, ensuring that their hotels and affiliate brands all are connected and attract more customers.

What’s the best way to get guests to stay loyal to the numerous hotels each group offers? The offering of a loyalty and membership programs that spans each group. Marriott, Hilton and IHG offer loyalty programs that are based on a tiered or membership level; meaning that every customer that remains loyal to the brand has a potential to earn rewards from their stay ranging from an increase in amenities or an upgraded room to free hotel room stays and airline points. These loyalty programs are individual based, rather than company or group based, which means that regardless of who pays for the room, the actual guest earns the points for later personal use.  This is important to note because many corporations book employee travel for training, seminars, meetings, etc.  And although the employer pays for the room, it is the employee (guest) who earns the loyalty points, often using them later for family vacations.  Each hotel group has found a system that works best for them, feeding off of the feedback from their customers and their needs.  This is why brand loyalty is so important. The goal is to increase the hotel’s customer base through the use of brand identity. In essence, to have an emotionally backed choice for the hotel that makes the customer feel as as if the hotel is their home away from home— familiar but one they would choose irrespective of the competition.

 

So what does brand loyalty have to do with investments?

 

Put simply, investments are driven by interest and the ability to lower risk as much as possible. While no real estate investment can ever be fully guaranteed, there’s something to be said about a hotel investment that carries a Brand License with a steady history of customer loyalty and a large customer base. The effort that the hotel brands put into their loyalty program helps to lessen the risks of investing into this type of real estate.  A Holiday Inn Express performs with a certain sense of stability and predictability than… let’s say Bob’s Bed & Breakfast.

If you’re looking to invest in a hotel, be honest with yourself. While investing generally involves making logical, calculated risks about land and construction cost, make sure to take into account the brand’s loyalty as well. While brand loyalty may often become a subjective decision on behalf of the customer, the success of such loyalty should speak volumes to an investor. Brand loyalty shouldn’t be overlooked. The ability for the major hotel chains and their various brands to attract such a grand following helps ensure that a licensed investment in such an establishment would be worthwhile. As a frequent traveler you wouldn’t ignore your natural brand loyalty and you shouldn’t do so when considering investing in hotels as well.

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The New Industry: Hotel Crowdfunding

The New Industry: Hotel Crowdfunding

Crowdfunding has revolutionized the way people raise money to start new businesses, and the model has caught on in a number of other industries. Hotel crowdfunding is at the front of this new fundraising model. It gives investors the opportunity to cut out the middleman and invest directly in properties they believe in. Simply put, hotel crowdfunding gives everyone, from the seasoned investor to the newcomer, a way to invest in qualified hotel real estate properties.

 

How It Works

 

Potential hotel investors sign on with a hotel crowdfunding company, create their user profile and browse for deals they might be interested in. Once they find a property that fits their investment goals and budget, they can transfer funds and start their investment. Online dashboards provide feedback and information about each of their investments.

 

Who Can Invest?

 

Recent changes in regulation for the industry have made it possible for virtually anyone to own a piece of a hotel property. Investors fall under the categories of “accredited” and “unaccredited.” Accredited investors are those who have a special status under financial regulations, which typically means they have a net worth of at least $1 million or meet other income thresholds. Those who are unaccredited can still invest, but may be limited to certain offering types that become burdensome or take away general solicitation privileges from the sponsor.  And heck let’s face it, how are you going to find an investment opportunity if the deal can’t be generally solicited? That’s all about to change when crowdfunding companies like Equityroots.com take advantage of the newest securities laws such as Regulation A+, which carves a path for non-accredited investor participation.

 

Why Is Hotel Crowdfunding Becoming So Popular?

 

Besides hotels being an exciting and rewarding asset class, hotel crowdfunding offers a unique and innovative way for people to manage their money. They can invest in the hospitality industry without having to raise the capital to buy a franchise on their own, and they get the benefit of being able to invest alongside industry experts who know how to operate the property.  Many times, the investors are thinking about who they are investing with just as much as what they are investing in.  As of 2015, there were more than 300 securities-based crowdfunding real estate development offerings, and that number is only expected to get bigger as time goes on.

 

 

EquityRoots - Hotel Real Estate Investments Platform

 

 

Hotel crowdfunding is disrupting the traditional way of real estate investing, and it is also becoming a disruptor as a finance mechanism for large-scale projects. Investors can influence the outcome by choosing what they want to fund, and companies building hotels can raise the equity capital they need from the local community, or an online crowd of like-minded investors, rather than relying on some form of institutional Wall Street capital.  Money is money after all, no matter where it comes from.  Letting the masses have a shot at the risk and rewards is undoubtedly progression of our capital markets and financial Democracy.

 

Link: http://www.cnbc.com/2015/10/02/hotels-join-the-crowdfunding-craze.html

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EB-5 Visa Program— A New Way to Improve the Economy

1 min read

EB-5 Visa Program— A New Way to Improve the Economy

Since 1990, the EB-5 investor program has gradually increased in popularity in the United States over the years. Initially, not that many people—including prospective foreign investors from China, India and Africa—knew about this glorious opportunity to become a legal citizen of the United States. That is not the case anymore, especially during the last (5) years. The demand for EB-5 visas seems to have reached new heights considering the huge spike in new hotel and real estate developments and crowdfunding platforms operating in the United States. In addition, a lot more real estate developers and issuers have been actively pursuing foreign investors overseas by flying out to promote their project proposals in person. As a result, there has been an increase in applications for EB-5 visas— which led to a cap of 10,000 applications being set in the United States.

What is an EB-5 visa?

The EB-5 visa program is a process that allows foreign immigrant investors to become permanent legal residents of the United States by performing and satisfying certain conditions. If these conditions are satisfied, that particular immigrant investor will receive a visa (equivalent to a green card) that will allow them to live in the U.S. To be eligible for an EB-5 visa, the immigrant investor must invest at the minimum $500,000 in a Targeted Employment Area (high unemployment or rural area) or $1 million in a new commercial entity that produces a for-profit business.

Furthermore, through this investment, there are more conditions that need special attention from prospective foreign investors. First, foreign investors should be aware that they must be able to demonstrate that their investment created or preserved at least 10 full-time jobs for qualified employees within the United States. Secondly, if foreign investors can provide proof that 10 full-time jobs were created within two years, the investor and his family (spouse and children under the age of 21) will be eligible to have the temporary restrictions removed from their status and to become permanent residents of the United States.

EquityRoots - Hotel Real Estate Investments Platform

What’s so special about the EB-5 visa?

In addition to being a proven foreign investment program, the EB-5 visa program has the potential to inject some life into the United States economy as well. For starters, the money associated with the million dollar investment will contribute to the funding of new business entities in the U.S. In addition, these respective foreign investors will own a share in that particular project or company they choose to invest in. And lastly, there will be an influx of jobs into the U.S. economy— thus allowing for the unemployment rate to decrease and for the Americans to sustain their quality of living.

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In the Hotel Industry, Brands Matter. Here’s Why!

3 min read

In the Hotel Industry, Brands Matter. Here’s Why!

Imagine the following scenario. You’ve been asked to travel out of town for a professional conference. The conference is being held in a convention center, and nearby there is a trio of nice, high-quality hotels—a Hyatt, a Marriott, and a Hilton. Your boss asks you which one you’d rather stay at; the choice, she says, is totally up to you.

If you’ve never traveled much before, you may express little preference. But assuming that you’re a seasoned vacationer, or that your work sends you to a lot of far-flung destinations, you probably know exactly which of these three hotels you want to be put up in. They may all be equal in their amenities, in their quality, even in their proximity to the convention center—but you have your brand, and you’re loyal to it.

Hotel Guests are Loyal to Their Brands

Such brand loyalty is by no means uncommon among tourists and travelers—the people who make up the hotel industry’s basic client base. Many regular travelers have brands that they stick to whenever they can, whether traveling within the country or even internationally. Hilton people tend to remain Hilton people; Hyatt people pick Hyatt hotels whenever they have a chance. And so on. In fact, many regular travelers would prove all too willing to drive an extra couple of miles to their convention center just to get the hotel of their choice.

A big part of this is consistency. People take comfort in knowing that all Hyatts are essentially the same, in much the same way that a Big Mac tastes the same at any McDonald’s in the country. Not only is there a basic level of quality that’s always going to be met, but you know whether or not there’s going to be free Wi-Fi; whether or not there will be a breakfast service; you even know what kinds of bedding to expect. For people who travel frequently, these little comforts are no small thing. They ensure an experience that is dependably posh and surprise-free.

What’s more, hotel owners actively foster this level of brand commitment. These days, most major hotel chains offer customer loyalty rewards, meaning discount points for those who consistently pick the same hotel brand. So not only do regular guests get a consistent and surprise-free experience, but the hotel chain actively makes it worth their while.

EquityRoots - Hotel Real Estate Investments Platform

Brands Matter for Investors, Too

All of this underscores an important point for the investor—that while no real estate investment can ever be fully guaranteed, a hotel that’s well-managed, situated in a vibrant market, and affixed to a recognizable brand certainly comes with some advantages, and a greater chance of success.

Just take Marriott as an example: This is a company that has done so much to ensure a consistent guest experience, and has built such an effective loyalty program, that investing in a new Marriott hotel is effectively investing in a business with a ready-made, built-in market.

All of this goes to show that, when considering a hotel investment, brand matters. And that’s one of the things that allows EquityRoots to stand out. We understand the role that brand plays in consumer behavior, and we can provide access to some of the best hotel brands in the world. This includes even the Big Three-Hilton, Marriot, and IHG—which are only attainable to the most seasoned and successful of hoteliers. (Even those with plenty of money and a few years of hotel experience are by no guaranteed a place at the Big Four table.)

Hotel guests don’t ignore brand affiliations—and hotel investors shouldn’t, either. Contact us today to learn more.

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Intrastate Crowdfunding, a Game-Changer?

Intrastate Crowdfunding, a Game-Changer?

The state of Illinois recently proposed a bill for intrastate crowdfunding. The intrastate crowdfunding law proposes the ability for unaccredited investors to participate in offerings that have a physical presence in the same jurisdiction where all investors are domiciled. For example, the intrastate crowdfunding law would allow all non-accredited investors that live or reside in Illinois to invest into a hotel crowdfunding project that is also located in Illinois.

So what’s the catch? All investors must be from Illinois. Not a single investor can reside out of state. Albeit, limitations in place— intrastate crowdfunding might be a solution for non-accredited investors that are often denied from investing into businesses. Despite being financially savvy and stable, many non-accredited investors are often prevented from investing under 506(c) public offerings. Many States are tired of waiting on the Federal Government and the SEC to finalize rules that would allow more unaccredited investors to participate, hence States have independently taken action into their own hands with State sponsored legislation.

House Bill 3429, regarding intrastate crowdfunding, in Illinois was well received by local business owners and entrepreneurs. The bill balances the needs of investors with the needs of businesses looking to raise capital. If and when the intrastate crowdfunding law becomes effective, EquityRoots.com will be on the verge of being able to allow non-accredited investors to participate in intrastate offerings. Equity crowdfunding could possibly be a workable source of capital and game-changer for Illinois small businesses and entrepreneurs. Check out the article published at crowdfundinsider.com for more information on the proposed bills regarding intrastate crowdfunding.

 

EquityRoots - Hotel Real Estate Investments Platform

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