4 Tips and Considerations for Acquiring a Profitable Hotel Property

Front of a fancy hotel

Investing in real estate is an excellent way to grow your portfolio. Most investors may look at a house or duplex for rental purposes, but hotels are also an option for an experienced real estate investor. However, before investing, learn how to buy a hotel so you don’t regret your purchase because hotels can be riskier investments than other types of real estate.

4 Tips and Considerations for Acquiring a Profitable Hotel Property

Before you make the purchase, first know these metrics for the property.


Is the location ideal? Is it on a beach or in a mountain town near a ski resort? What will draw people to this hotel?

If the hotel is performing poorly or is in an isolated location, what will you do to draw visitors to your hotel? What have the current owners tried to do to drive business to their property? What would you do differently?


Second, recognize the risk of investing in a hotel. For example, if you invest in a duplex or rental home, you likely lease that property for one to two years. Once the property is leased, you have stability for several months or years while the same tenant remains there.

A hotel is a micro version or a rental home. You “lease” a room every night, so there is much less stability. In addition, your rentals may decrease when the economy goes down, or events like the recent COVID-19 pandemic hit. If you’re in a touristy location, how will you keep your business afloat during the off-season?

Know the ADR and RevPAR

The Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) are key metrics to determine how much the property makes per night and what potential profit you may earn.

According to EHL Insights, “ADR is the measure of the average nightly rate paid for rooms at a hotel and is calculated by dividing room revenue by rooms sold over a particular period of time.”

Likewise, “RevPAR [. . .] is calculated by multiplying the ADR by the occupancy rate. Investors can also think of it as the total room revenue divided by the total number of available rooms” EHL Insights.

Know the Customers

What types of customers will your property attract? Ideally, you will want to attract both tourists and business people. The business people will book rooms at your hotel during the weekdays and most of the year. Tourists will give you business during the weekends and tourist season. It would be best to have both types of customers to make your hotel profitable.

Final Thoughts

You need to do research to learn how to buy a hotel. What’s outlined here is some of the most important metrics you should know, but you will need to dig deeper. Buying a hotel is riskier than other types of real estate investments, so you want to be both knowledgeable and experienced before purchasing one.

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