Hotel investments include many of the characteristics of retail service establishments along with the high capital investment which is common to real estate ownership. However, unlike other retail service establishments, the inventory (guest rooms, lounge seats, etc.) has a short shelf life, often as little as one hour. Therefore, unlike other forms of real estate, rental (lease) periods are DAILY, and rental rates can be adjusted on short notice.
This gives hotels a distinct advantage in being able to respond almost immediately to economic changes. This is one of the primary reasons hotels are the highest yielding class of commercial real estate. These short term cycles mean hotels recover more quickly than other types of real estate, are more responsive to market forces and have greater flexibility.
Perhaps no other period in history has presented such opportunity to acquire properties at deep discounts to replacement cost. According to a report by Arthur Andersen & Company…
Inner Circle is focused on acquiring under-performing properties in nonetheless strong and improving markets. These properties are generally expected to generate return on equity of at least 20 percent — and often closer to 25 percent — and they have a shorter-term investment horizon of three to five years, with clearly defined exit strategies. We expect to improve performance through capital refurbishments, significant management improvements and possible “re-flagging.” Utilizing our affiliated management company we employ a specific strategy that allows for direct control over every property with a clear alignment of interests.
Clearly the timing is right to take advantage of the opportunities in the marketplace. With a clear vision and a well defined strategy, now is the perfect time to join the Inner Circle.