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Enjoying great returns investing in 5-star hotels

Mar 23, 2017 | Emerging Trends Advisors

Everyone is looking for the best possible returns whilst taking the minimal amount of risk. The problem is that there are very few investments that would be classed as low risk and those that are pay returns that often fail to beat inflation. This is disastrous as it means that you are effectively losing money in real terms – hardly what you planned when you started saving all those years ago. This means that investors have got to accept a certain level of risk with this level varying from investor to investor.

There are lots of investments that are officially medium risk but in reality, if you do your research and due diligence most of them are quite safe. Many investors now seek investments that are tangible as they have grown increasingly suspicious of ‘paper’ investment such as stocks and shares. Property seems to be the investment of choice for the cautious investor with ‘bricks and mortar’ being viewed as reasonably safe.

Enjoying great returns investing in 5-star hotels
Enjoying great returns investing in 5-star hotels


Where that property is purchased and how much you paid for it will be big factors in determining the return on investment (ROI). Naturally, as a rule, better locations pay higher returns as demand is also higher although paying over the going rate will of course impact on the ROI received. The downside is that these properties will cost more so more capital needs to be invested meaning they are unaffordable to some investors.

Sadly, investment properties can come with other downsides in that they can require a lot of work and time. Tenants can also cause major headaches either because they can’t be found in the first place or because they have ‘issues’ once they have moved in. This could be failing to pay rent or not taking care of the property. Management companies can help with this but will significantly eat into your ROI and they will not guarantee finding tenants.

These problems have led to the development of something called the rental guarantee concept. This is where investors are guaranteed a certain ROI per year for guaranteed number of years. The concept is easy to understand and involves investors buying properties, usually direct from developers, and renting them back to the developer or a related third-party. This gives the investor the stability and security that they crave along with a healthy return.

The schemes have now been adopted by some of the 5-star hotels here in Thailand giving the rental guarantee concepts greater credibility and even greater levels of security. The hotels have fantastic financial backing as well superb facilities, management teams and excellent, prime locations. Not only do you get a great return but effectively you are investing in a 5-star hotel located in a thriving resort.

An example of one such rental guarantee concept is available in the Amari hotel in Pattaya. The hotel is completed and they are currently guaranteeing a return of 5% p.a. for five years with projected returns expected to be upwards of 8% p.a. in the following years. This is a passive investment as after the initial investment has been made little or no input is then required.

Two other rental guarantee concepts are available in projects that are currently under construction on the island of Phuket within the Best Western and Ramada hotels. As these projects are yet to be completed the returns offered are slightly higher to reflect this with 7% p.a. guaranteed for five years and projected returns in excess of 10% p.a. in the years thereafter. Once again these have the backing of well-known reputable hotel brands in prime locations.

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