Chain Scale: Different Flags for Different Travelers

 

Chain Scale: Different Flags for Different Travelers

 

Think about the time you stayed at a hotel. Was it for work? maybe a vacation?

Maybe it was for an extended period of time? It turns out, major hotel brands create different products or “flags” to serve a wide variety of needs for their customer base, and knowing how to differentiate between them allows a market to build several different types of hotels. Hotel companies know that their customers have different preferences, depending on how much they’re willing to spend, and for what reason they are traveling. Here’s a quick rundown of some of the basic hotel types, or chain scales, that major hotel brands offer:

I’m John with equityroots.com, and we’ll be taking a inside look at different types of chain scales.

 

#1 Full-Service Hotels: Full Service Hotels are typically found in large city centers and other scenic destinations. They often have amenities including on-site restaurants, spas, bars, lounges, and banquet rooms.

 

#2 Select-Service Hotels: Select-Service Hotels are the most popular and consistent option for many corporate and leisure travelers due to their balance of amenities and price. Select-Service hotels are convenient for corporate travelers who can meet in conference rooms and business centers within the hotel near or around their work destinations. It’s also a place they can unwind in social public spaces that often feature a food and beverage component.

 

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#3 Limited-Service Hotels: These hotels offer the bare essentials such as free WIFI and free hot breakfast. These hotels take a skip on the amenities that their full-service counterparts might have. You won’t find spas or restaurants, but they are extremely efficient, and many limited service hotels now have  modern fitness rooms and business centers.

 

#4 Economy: These hotels appeal to the budget conscious traveler. Economy hotels like Motel 6 and Days Inn offer basic lodging without frills or many amenities.  For that reason, economy hotels/motels typically cost less to stay at.

 

#5 Extended Stay Hotels: For travelers looking to stay for a longer trip, extended stay hotels are a great option. Extended stay hotels have in-room kitchenettes for individuals who are staying away from home slightly longer than the typical business or leisure trip. These hotels appeal to corporate travelers working for long-term projects or families in-between moving.  Many technology parks with foreign IT workers and hospitals often build a extended stay hotel on their campus.

 

So there you have it! As a prospective investor, you’ll have to make smart decisions about what type of hotel makes the most sense to invest in. Knowing the location and nearby demand drivers will help you select the best type of hotel product.


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New Construction Hotels: Positive or Negative for the Local Hospitality Market?

 

New Construction Hotels: Positive or Negative for the Local Hospitality Market?

 

 

Looking at all the hotels around us, one might think that all the developers are oversupplying the hotel market. But like the chicken or the egg concept, the need for hotels exists due to the demand of travel.

According to the data acquired from Smith Travel Research, (STR), occupancy rates for February 2017 was around 62.9 % compared to April 2018, which is at 68.1%. Even though  there are hundreds of new hotels being built across the United States, there seems to be no fallback on national occupancy rates. That’s because hotel developers are strategically developing newer markets and different brands in other cities beyond New York, Los Angeles, and Chicago.  Competition is steep and it’s difficult to find an empty lot to build your hotel in these bigger cities and their sub-markets, but developers are finding it equally rewarding in going out to underdeveloped cities where there’s less competition and much easier to get your property built.

Not only the occupancy has risen over the last year, but average daily rates (ADR) metric has also gone up. ADR is a metric used to gauge the average rental price per room. In April 2017, the ADR was recorded at $128.75, compared to 2018’s $130.81.  Many critics and government staff speculate that increasing the supply of a product should drive its value down. In theory, it should! But as a matter of practical experience and reality, that isn’t always the case. Then what makes these hotels charge their customers more money? Not only that, but what convinces the customer that the rooms are actually worth the price he or she is paying?

 

It’s a simple answer, New Construction.

 

Newly constructed hotels includes the best of everything. The quality of the property and service are expected to be and typically are the best of that hotel class. New construction hotels are starting to go the extra mile and bringing the future to you by providing you with keyless entry to your hotel room using your mobile phone, ability to control your room’s temperature from your tv, and having fully interactive robots to obey your room service commands and toiletry item requests.

People around the world are willing to pay a higher rate in order to use these services, rather than staying at an older hotel where the cost might be slightly cheaper, but the level of service and amenities is nowhere near what a newly constructed hotel offers.

For anyone who wants to look at this subject from every critical angle, I think there is one more scenario worth playing out.  Let’s assume for one minute that supply and demand of hotel rooms are balanced, would bringing more hotels into the market at that point help or hurt the economy? As we discussed above, people are willing to pay a higher ADR if they are offered higher quality properties. So it’s safe to say that newer hotels can help increase ADR.  At the end of the day, it’s less relevant to hotel investors whether it’s ADR or Occupancy Rates that increase, they often look to a combined metric, Revenue Per Available Room, (RevPar). RevPAR is calculated by multiplying the ADR with the occupancy rate. So, technically new supply is still healthy in a balanced market, unless RevPar starts to decrease.

 

Sources:

http://www.hotelnewsnow.com/Articles/275171/STR-US-hotel-results-for-week-ending-17-February

http://www.hotelnewsnow.com/Articles/282848/STR-US-hotel-results-for-week-ending-31-March

https://hospitalitytech.com/6-mega-trends-hotel-technology

 

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Upcoming and Current Trends in Hotel Design

4 min read

 

Upcoming and Current Trends in Hotel Design

Brands like Marriott’s Moxy target the growing Millennial market in the Hotel Industry.

 

Well established hotel companies and investors are looking to stay ahead of the curve, and this is definitely the case when adapting to trends in the hotel industry.  In today’s hotel markets, Millennials are establishing themselves as a formidable force. With markedly different preferences than their older counterparts, hotel developers and investors are looking to cater to these younger travelers to ensure that they stay ahead of the curve. For many hotel flags, we are seeing significant changes in response to those preferences.

Good news for the hotel world – Millennials overall prefer to spend their money on experiences, rather than on material goods. Luckily for hotel investors, this means that hospitality is a great area of opportunity. The Millennial travel market is only going to grow more and more, and learning this generation’s preferences and how to appeal to them is essential for continued long-term success in the hotel industry. Here are some of the ways hotel’s are seeking to appeal to this group of travelers, and earn brand loyalty early on.

Interactive Social Media

Millennials are more tuned in to their devices than ever. As opposed to more traditional advertisements through commercials and print marketing, many of the most successful brands are turning to engaging their customers online. Marriott’s Moxy brand, for example, has established their own instagram account (@MoxyHotels), and encourage their guests to share pictures online using hashtags such as #AtTheMoxy. This social media wave is incredibly efficient – guest travelers who post and share their experiences at Moxy Hotels provide what is essentially free marketing. That extra boost in exposure to guests’ peers can build a rapport among Millennials as they begin to build loyalty to specific brands.

More technology

No surprise here. Going hand in hand with social media, capitalizing on technology and engaging with your customers is a major step that hotel developers need to compete with. Having wi-fi available for guests beyond just their rooms has become expected, rather than a luxury amenity. Many hotels are moving towards providing charging stations in the more communal areas of the hotel, or providing more USB charging ports in their rooms to accommodate mobile-friendly travelers. Even hotel rooms themselves are seeing an increase in the number of power outlets. Holiday Inn parent company IHG also recognized such patterns in their guest habits:

“At Holiday Inn, the first thing hotel guests can do upon entering a room is recharge their phones. When designing the new H4 guestroom, parent company InterContinental Hotels Group conducted focus groups and consumer testing to determine where to place power and USB outlets…One result is a ‘Welcome Nook,’ a place for guests to hang their coat, drop their keys, and plug in devices.”

Airbnb has developed a mobile app to  appeal to younger customers more than ever, and creating apps that facilitate check-in and check-out will give hotel brands an edge over their competition. Large companies such as Marriott already have apps that allow you to check-in to your room on your phone, and also incorporate other features such as allowing you to track and earn loyalty points. Creating these apps also offer an additional stream of revenue by opening up advertising opportunities on the app to nearby businesses seeking to appeal to Millennials and other customers as well.

Large Communal Spaces, but smaller rooms

With the increased emphasis on social media and communal experiences in general, hotel brands are seeking to develop hotel products with larger communal spaces. Larger lobbies, recreational rooms, and more open-design spaces. Some hotels, such as Hilton’s Tru brand, are now also designing their rooms smaller, with more efficiency. A hotel may remove their ironing boards and in-room bars in individual rooms in exchange for larger communal versions of them on each floor. Similar to the advantages of a dual-brand model, these design differences have the potential to save developers money, while also appealing to their younger customer base – a double win.

 

More outlets, and larger communal spaces geared toward more points of social contact.

More outlets, and larger communal spaces geared toward more points of social contact. (Source: Tru by Hilton)

It’s important to note for hotel developers and investors that while smaller rooms are efficient and may appeal to many customers seeking a more communal experience, caution should be taken especially in full-service and luxury hotels, where making rooms too small can actually be unattractive to their customers who may value that larger space and more individualized amenities. Millennials currently are largely tourist travelers looking at more budget-friendly options. Generally – keep in mind which customer base you are appealing to, and what amenities your hotel offers.

Overall

It’s important to keep in mind upcoming preferences as hotels seek to capture Millennial travelers. The Millennial generation is still growing and as the generation ages, their average income increases, and we expect full-service and even luxury hotels to start adopting some of the trends and design changes that we already see in millennial minded hotel products.

However, at the end of the day, it’s also important to continue driving the personal, human aspect of hotels. There is no replacement for quality service, and hotel developers should not see technology and amenities as a complete replacement for strong customer service and quality associates and hotel staff to drive guest satisfaction. It’s that combination of strong customer service and appealing amenities that will push Millennial interest and loyalty in the long run.

 

Sources:

Saiidi, Uptin. Millennials are prioritizing experiences over stuff. CNBC. May 5, 2016.  https://www.cnbc.com/2016/05/05/millennials-are-prioritizing-experiences-over-stuff.html

Moxy Hotels. Marriott. http://moxy-hotels.marriott.com/en

Trejos, Nancy. “Hotels add plugs, ports for device-laden guests.” USA Today. May 21, 2017. https://www.usatoday.com/story/travel/roadwarriorvoices/2017/05/21/hotels-add-plugs-ports-device-laden-guests/101863684/

“Marriott Mobile App | The Perfect Travel Companion.” Marriott. mobileapp.marriott.com

Meltzer, Matt. “How Tru by Hilton Is Trying to Win Over Millennials.” Aug 23, 2017. CN Traveler. https://www.cntraveler.com/story/how-tru-by-hilton-is-trying-to-win-over-millennials

 

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How do Brokers help you or hurt you?

2 min read

How do Brokers help you or hurt you?

Brokers are a common staple of the real estate investment world, and many people seeking to sell a property hire a broker with the hopes of finding a legitimate buyer. Brokers have been commonly associated with people looking to purchase or sell real property, but let’s take a moment and consider some of the advantages and disadvantages of hiring a real estate broker.

Advantages

In short, a broker is a person who connects those interested in selling real estate with those who are looking to invest or buy real estate, including hotels. The most obvious reason that many people choose to hire a broker is the fact that brokers have access to the Multiple Listing Service (MLS) and they are supposed to have expert knowledge about the market, saving you a lot of the time and energy that goes into finding an ideal transaction.  But is that always the case?

Disadvantages

The mathematical honesty is that although you might want the best deal possible for your own interests, your broker has the easier path to reaching a deal in which he or she gets a commission.  Brokers are even starting to offer “exclusive contracts” that allow them to get paid, even if he or she was not directly involved in procuring the end result. Despite brokers following what industry standard refers to as “duty of care,” brokers are compensated a fee for a transaction that closes, regardless of whether it’s a good or bad deal for buyer or seller.  It’s just the nature of the beast, the broker’s compensation model was designed to be an early and instantaneous event.

Are they Adding Value?

 When you’re a seller of real property (including hotel investments), you must ask yourself if brokers can do anything other than listing your property on the MLS?  They’re supposed to have a rolodex of leads and contacts they should be able to contact regardless of listing it on MLS.  Are they helping the parties reduce their transaction cost or just sitting idle and observing the process?  Many times an experienced broker can organize and initiate the legal, accounting, and transactional professionals for their clients, saving thousands of dollars at the closing table.  However since it’s not an industry requirement for brokers to have this experience or expertise, they often neglect to take this initiative for their clients.

Can they help Substantiate Value?

A good broker should be able to efficiently and articulately advocate on your behalf, essentially paying for themselves.  This means their voice should be influential in the transaction and explain why the sale should occur at a higher or lower price.  This requires a broker to have sophisticated knowledge about the property and/or the business merits of a transaction, especially facts and trends that can not be easily quantified.  Ask yourself, does a broker have this type of knowledge about your property?

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Benefits of Equityroots.com Hotel Investment Platform:

Sometimes the privileges of accessing the MLS outweigh the disadvantages, making sense for a person or business to use the services of a broker.  But many times, adding a broker to the transaction as the buyer simply adds cost to the seller and reduces your chances of getting a discount on the purchase price.  There are some instances where a broker is very useful, helpful, and worth every penny.  Unfortunately, there are probably more instances where the broker didn’t add any value to the transaction or substantiate your property’s value to the best of its abilities.

Equityroots.com depends on land-use knowledge instead of brokers to find its next opportunity.  The hotel investment platform does not pay any brokers, dealers, or commissions to source its investors.  The intent of this model is so that people can invest into real estate projects and hotels without paying commissions and brokers.  It’s pretty clear to see the advantages for investors under this model.  Our investors can build a diversified portfolio of franchised hotel assets, without paying any commissions to invest.

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The Hotel Investment End Game: Exit Strategy

2 min read

Exit Strategy - Hotel Investments

 

Often times, when we talk about hotel development and investments, we imagine dynamic beginnings. Plans and blueprints are drawn up for new construction hotels, and investors seek promising returns on their initial investments as the hotel begins its operation. Yet, in order to be a strategic investor or owner of a hotel, it’s important to think about the end game for your investment. Being able to keep the long-term goal for your hotel investments can ensure that you do not mismanage your hotel years down the road. Poor planning at the outset might be hidden by a strong start to your hotel or investment’s life, as your investment ages, that poor planning can really cause some serious liabilities for you later.

As with many considerations with hotel investments, there are a number of key factors you should consider before even starting an investment project in an existing or new construction hotel. Unlike bonds or stocks, your hotel investment is a physical “brick and mortar” investment. Over time, there will be expected wear and tear on your hotel, and your hotel will need to go under renovation or redesigns in order to stay competitive with newer construction hotels and changing trends in customer preferences. Investors can have different strategies – where one investor may intend to continue to invest in a specific hotel for a long period of time, other investors may view the same hotel as a short-term investment. Regardless, it is smart to think ahead to your exit strategy, or how you plan to exit your investment in a specific hotel.

Hold time

The holding period for an investor is the length of time that investor holds an investment. In other words, this is the time period between the time the investment is purchased or developed, and later sold. The hold time varies greatly based on the hotel. Existing construction hotels tend to have shorter hold periods, whereas owners who newly develop a hotel tend to have longer hold periods, especially when considering the front-loaded costs to develop the hotel in the first place. This hold time also depends on the investment strategy. Investors that are looking to generate a quick source of cash-flow typically have shorter holding periods, but investors that want a larger and more cumulative return adjusted for inflation may seek to hold onto (and continue to renovate and update) their hotels for longer.

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Sometimes hotel companies sell their hotels in timely fashion before a property improvement plan (PIP) is identified by the Brand.  In a nutshell, a PIP outlines a list of improvements, modification, and general upkeep and maintenance of a hotel in upcoming years.  Hoteliers sometimes elect to sell a hotel before its PIP because they want to avoid the inconvenience and expenses associated with renovating the hotel.  Sometimes hotel companies choose to exit or sell their hotel when their license agreement with any given Brand is coming to an end.  Other hotel companies like to develop newly constructed hotels, stabilize their performance, and then sell the property for a big premium to institutional grade investors.  An exit strategy has to be realistic with the condition and age of the property.

One must be conscious of the timeline that he or she is investing in.  The goal is to time your exit strategy in strong or peak markets, while down markets and recessions are typically more advantageous to buyers.  Being conscious of the general economy and timing your exit is an important part of the process.  One must be cognizant of credit markets, to know whether a sale can occur and get financed (unless your buyer doesn’t need financing contingencies).  Hotel investments and markets are cyclical, so there is a good and bad time to exit and therefore the disposition price is largely reflective of this cycle.  

Common strategies for hotel investors are:

  • Long term holds, aka core holdings
  • Opportunistic value-add and disposition
  • Fix and Flip

On another topic, what to do after exiting?

See our blog on 1031 exchanges to learn how hotel investors are deferring their long term capital gain tax liabilities by electing to use Internal Revenue Code, Section 1031.

 

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How Does Due Diligence Work?

2 min read

Due Diligence Hotel Investments

2 Variables: (length of time & amount) Two important variables in a purchase and sales agreement include the amount of time that is being requested in the due diligence period and the amount of the due diligence deposit funds. While these are two major variables, there are several other variables worth considering. Developers should always consult and discuss other variables with a local attorney when negotiating purchase, sale, or due diligence instruments.

Due diligence time is a very critical time for a potential buyer or investor.  This is the period of time in which a buyer or investor is going to find out whether their plan is feasible and worth moving forward. The questions you need to ask and tasks that must be completed during this review process can include:

  • Whether your development is financially feasible: How much will your development cost?
  • What interest rate will you borrow money at?
  • What is the predicted return on your equity investment?
  • It’s also a time that you’ll want to inspect the land and the structural integrity of it. Various engineers will conduct soil borings and lab studies to determine geotechnical and site plan data and how that may affect or bring about hidden construction costs.
  • Will the city or local municipality allow it? Often times, developments can be restricted by regulations of the city or local municipality. It could be the case that only specific types of developments such as office space or hotel constructions can be built in a given area which must follow specific zoning rules. This is also known as entitlement process.

Due Diligence Time Period

Depending on the amount of time you need to complete all of these tasks, it can affect your deal. Shorter due-diligence periods are more attractive to sellers, therefore it is more likely to demand and receive a price reduction if your proposed due-diligence period is relatively short. The same goes the other way. If the amount of time being requested in the due-diligence period is long, it will probably require a higher purchase price to induce the seller to agree.

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Due Diligence Dollar Amount

The second variable in a due diligence deposit is the size, or the dollar amount, of the actual deposit itself. This variable allows the investor to do a variety of things. Sometimes you can propose to modify the terms and amount of your deposit. You can make the deposit refundable or non-refundable, essentially changing the amount of risk you are willing to take. Oftentimes, the risk you take with your due diligence deposit can have an impact on the amount and terms of the actual purchase price in the contract.

A quick example might help clarify how this works:
Imagine there is a piece of land that I would like to buy for $1.2m, but the land is listed for sale at $1.3 million. To induce a seller of real estate to sell the land to me at the lower $1.2 million price, I may offer a $100,000 non-refundable due diligence deposit to the seller. Many times, that seller will be induced by the chances that I don’t close on the deal and the potential of earning easy $100k. You can customize these terms, allowing your money to go non-refundable after a specific amount of time in the total due-diligence period, or right away. Again, some of this depends on the risk you are willing to take. Sometimes, offering a non-refundable deposit is a way to stick out among other buyers. If you are competing against a diverse group of buyers, offering a non-refundable deposit is a sure way to get the seller’s’ attention. Sometimes the land appears to be very risky and seems like there might be topographic or geotechnical issues with the land, and you may want to specify that your due-diligence deposit will remain fully refundable until you have had time to research potential problems with your civil engineer.

Where does your due-diligence deposit stay? It should technically be deposited into escrow with a mutual joint order escrow agreement. This ensure that your money is in safe/neutral hands and can not be accepted or deposited without a joint order from all parties. But this can also be customized. If you intend to offer a non-refundable deposit, the deposit can sometimes be sent directly to the seller or seller’s attorney. As always, make sure to hire a local attorney to advise you through any transaction.

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Schaumburg, IL: Investing Where People Want to Live

4 min read

MONEY magazine ranks the best places to live in the nation every year, and the Village of Schaumburg definitely set out to impress this time around, ranking 9th overall. Of course, the EquityRoots team isn’t surprised — the ranking is a testament to the type of markets we like to invest in. The Schaumburg Holiday Inn dual brand project is worth its weight for investors.

Demand Driven

Our team understands that some of the strongest performing investments for hotel investors are often located where quality of living is highest. Whenever EquityRoots’ receives a funding request, our team looks at the proposed project holistically, giving consideration to the brand, amount of funding, and nearby demand drivers that influence people to live or visit a location. Luckily, Schaumburg is abundant with demand drivers, all of which work to ensure that a new hotel development in the village will prove a fruitful investment and bigger economy.

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Schaumburg has a projected job growth of 3.0%, reflecting the village’s promising talent pool in years to come. Many of the companies opening or expanding in Schaumburg will look to host conferences and encourage business trips – which translates into increasing demand for available hotel rooms to host those business visitors. Do you like great weather? Schaumburg has on average 189 clear days every year. People generally want to be in an area that has nice weather, and that can translate to more tourists visiting Schaumburg’s parks and commercial centers, consistently driving revenue.

Many of the reasons why MONEY selected Schaumburg as the 9th best place to live in the US, or alternatively, many of the reasons why EquityRoots selected Schaumburg as the site for our dual-brand development. Source: MONEY Magazine

Other demand drivers can be physical. The Olympic Park is only a short drive from our development meaning that high school, collegiate, and team families have additional lodging options. This is a huge source of potential revenue not only from all the hotel rooms needed, but also for retail and restaurants that these teams will visit. The Woodfield Mall – the largest mall in Illinois and one of the largest in the nation – is an obvious demand driver and amenity for visitors. This benefit works both ways, creating a market where retail and hospitality compliment each other.

Woodfield Mall in Schaumburg, IL is a critical demand driver that brings in value not only through revenue generated from retail, but also as an amenity that supports local hotels and other businesses. Source: Simon Property Group

These demand drivers are also what led EquityRoots to decide that a new hotel in Schaumburg would be the perfect project. To keep up with the commercial needs of a growing Village and the chance to answer that with a high quality project, this project was designed to be healthy for the local economy in addition to the potential opportunity of profit to its stakeholders.

Local investors saw our IHG project as a chance not only to earn a potential return on a Class-A asset, it was also a chance to be a part of developing something that built positive value in their community. For our more recent IHG project in Schaumburg, a significant number of investors were from Schaumburg and nearby regions in Northern Illinois. When you look at different real estate investment options, you also want to consider nearby demand drivers that often provide amenities and other businesses that promote high quality of life. Instead of looking at MONEY’s rankings as a list of the best places to live, you’ll be using it as a guide to help you invest smarter.

Sources

“Largest Shopping Malls in the United States.” American Studies at Eastern Connecticut State University. April 25, 2009.

“The Best Places to Live in America.” MONEY.

 

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Bhavik Dani Featured on Midland Investments Podcast

1 min read

Midland Self-Directed IRA & 1031

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.

Bhavik Dani Featured on Midland Investments PodcastInterested in learning more about hotel investments and EquityRoots’ hotel crowdfunding platform? Click below!

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EquityRoots: Democratizing Hotel Investments

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.

 

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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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Do Brands Still Matter in 2017?

5 min read

Are Millennials Blind to Hotel Brands?

Do brand preferences still matter in the Millennial generation? This question comes up because Millennials have shown an emerging taste for untraditional, decentralized, and independent local providers of goods and services in what is commonly referred to as the “sharing economy”. The sharing economy has undoubtedly made an impact across multiple industries.  Sharing economy leaders like Uber and Airbnb are estimated to grow to $335 billion by 2025. This significant growth leaves many hoteliers and investors alike wondering how the hotel industry will continue to change moving forward. Many are also asking if hotel brands matter at all? After all, Millennials seem to be happy with online travel agents (OTA’s) where brand loyalty doesn’t matter, or online platforms like Airbnb which reveal a preference for more communal, local, and location-authentic lodging experiences.

Are Millennials Blind to Hotel Brands?

Despite higher preferences than their older counterparts, Millennials still show strong preferences for branded hotels.

The travel and hospitality marketing firm MMGY Global launched a study hoping to answer questions about these changing hospitality preferences among American travelers. (You can check out the full article here.) Peter Yesawich from MMGY Global has some great insights worth checking out, and below is a snippet of that report:

MMGY Global

Source: MMGY Global

Highlights from the Study

Our team at EquityRoots also wanted to take a look at the study results to find a conclusive answer on whether or not hotel brands will still matter into the future.

In short, yes – brands still matter, and investing in the right hotels can still lead to a fruitful real estate investment.  It’s true that Millennials still show more interest in a shared economy, especially compared to other age demographics. Knowing this, are hotels still solid real estate investments? Yes, of course they are. Millennials’ preferences are still similar to their older counterparts, including high preferences for full-service flags like Hilton, Marriott, and IHG (77%) as well as all-suites properties (70%). Looking at cumulative interest across all age groups, we see that big brand hotels are still preferred by a vast majority.

The rise of the sharing economy doesn’t take away from brand loyalty. Let’s take a look at our Millennial Airbnb travelers as a case-in-point. Bed and breakfast operations have existed way long before Airbnb (and even before the rise of hotel room standardization in products like Hilton and Holiday Inn). However, brands like Airbnb and HomeAway are streamlining alternative lodging, gaining strong loyal users. Even though Airbnb users are staying in different hosts’ accommodations from trip to trip, many Airbnb users continue to use only the Airbnb platform to find those rooms. In other words, they are familiar with the brand Airbnb and choose to book through there the same way that many travelers today maintain degrees of loyalty among the Hilton or IHG or Marriott. Despite the huge variance that might exist on Airbnb’s platform, users have come to Airbnb repeatedly with some sense of standardization and expectations.

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Hotel Brands Continue to Evolve

The question now becomes “how do current hotel brands adjust to capture the sharing economy audience?” It’s a question that hotels are already taking steps to answer including by:  

– Developing new hotel products like Marriott’s Moxy, Hilton’s Tru, and IHG’s Avid that target the emerging Millennial preferences

– Partnering with Airbnb to provide food and beverage solutions

– Offering “local experiences” and trips that are commonly utilized by the sharing economy.

The hotel investor can rest at ease. Hotel products from strong, established hotel brands aren’t going away anytime soon. Corporate travelers and companies still prefer lodging with hotels, considering hotel brand benefits such as loyalty points and more established quality standards across a wealth of hotel franchise locations. If anything, the hotel industry is thriving, continuing a trend of growth since 2010 as hotel demand increases faster than hotel supply. On top of this increasing demand, hotel companies continue to innovate and appeal to travelers, whether it be through adopting new food and beverage options, creating more communal living arrangements or utilizing the latest technology to provide travelers with instant check-in and other amenities. As the hotel industry continues to evolve, hotel investors will need to keep a fresh eye open for both strong performers in the present day, as well as potential performers in the future.

Sources

“2017 Set to Bring Modest Growth for U.S. Hotel Industry.” Zacks Equity Research. Jul 17, 2017. NASDAQ. 

“Global Portrait of American Travelers.” MMGY Global.

Moyer, Liz. “Hotels, Feeling the Pinch of Airbnb, Promote Local Experiences.” May 29, 2017. The New York Times. 

Simon, Elaine. “Food-and-beverage an opportunity for hotels, Airbnb to partner.” Sep 22, 2017. Hotel Management. 

Yaraghi, Niam and Ravi, Shamika. “The Current and Future State of the Sharing Economy.” Brookings India. 

 

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