Our Limitations on Funding

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 not worth the hotel investment. They do, but these three brands have a proven track record 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 a strong brand support that includes central reservation systems 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.

Are there any dollar amount limits on funding?

In short – no. There aren’t any dollar amount limits on funding. This is because hotel crowdfunding utilizes technology as one of the variables in sourcing capital. Oftentimes, the hotel crowdfunding deal itself and the sponsor behind it matters just as much as the merits of the deal. A Hampton Inn in New York City will have no problems raising capital online. The 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. Again, the market and the deal the sponsor behind it have very much to do with how successful each funding is. With that said, we would expect the New York City Hampton Inn would raise quite a bit more capital than a Hampton Inn in Albuquerque, New Mexico. 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.

 

 

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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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