Your Guide For Hotel Room Investment in Dubai 2021
Author: Sadiq Suleman
The concept of hotel rooms for investment purpose is relatively new. In the last decade, various opportunities have arisen for potential investors for adding this investment type to their portfolios. The option to invest in hotel rooms is available across the world, including Dubai.
How does hotel investment work?
Investment in a hotel room could be defined as a buy-to-let investment in uae. You can purchase the unit and also have the option to let it out for payment of guests. A hotel also acts as a management company by overseeing the process for the investor, specifically in a hotel apartment investment.
For the purpose of investment, hotels will provide various options to investors including personal usage and payment terms. Some of these differences are:
Guaranteed rental options:
There are some investments that provide a guaranteed rental scheme. This also means that they can help to provide potential investors with a safe and sound source of income for a specific amount of the investment period. However, in few cases it could be for life. As a result, the buy hotel room investment is a viable investment opportunity for potential investors.
There are some investments that provide personal use of the room by investors. It is usually limited to a specific amount of days in a year. After decreasing number of nights, the investor is provided using the room. This helps to maximize income of hotels.
As a result, it helps to maximize overall rental returns for potential investors. The ultimate strategy for investment is letting out a room throughout the year without taking advantage of the personal use allowance.
Split income and split profits:
In many investments within the hotel industry, income derived from a unit is split between the hotel management and investor. This helps to provide a financial incentive for hotel management team to gain income from various other amenities they provide in a hotel.
There are many hotels that can pool the income derived from rooms between investors. The primary aim of this strategy is to make sure that only one room would generate less profit when compared with the other in the same hotel.
Moreover, if a hotel does not do sharing of profits in this manner then they would be rotating room using. This will help to make sure that no room is unused. As a result, all rooms will generate income to buy hotel room investment.
What are the benefits of hotel Apartment investment in Dubai?
From an investor point of view, nature of hotel investments will allow potential investors for having hands off approach for investment in Dubai hotels. An organization will manage as well as market the room on an investor’s behalf. This is because it is mainly in their interest for enhancing revenue. The investor would reap benefits from several industry professionals that promote and manage hotel unit for them.
One of the biggest benefits for individuals that want to invest in hotel rooms of Dubai is that this mode of investment is regarded as commercial and not residential. This allows investors to have tax free earnings and capital growth.
As a result, investors tend to be relatively less exposed for long term vacancy when compared with a conventional buy-to-let property investment that could lie empty for several months at a time. Moreover, buying hotel suite investment is beneficial.
On average, yield generated through investment in Dubai hotels is usually higher when compared with buy-to-let investments. Gross yields of nearly 12% per annum can be achieved when compared with average gross yields from conventional buy-to-lets of nearly 5% per annum.
The stream of income that has been placed on the yield could help to increase the overall value of hotel building. Investors in Dubai have an option of gaining benefits from a quality development that would have amenities that are beneficial for guests.
This will increase the overall chances of obtaining a higher yield on investment. From a financial perspective, monetary value of hotels in Dubai has been primarily dependent on economic market conditions. So, if there is an improvement in economic climate, the hotel industry should also improve immensely.
Specific factors influencing success of buying a hotel Suite investment in Dubai
One of the key factors that influence your hotel room investment is location. It will significantly influence capital growth. You may require attracting domestic and global visitors. As a result, the development would require for being very close to transport links and also for local attractions.
Different locations can help in attracting various guests to a hotel. This will provide various facilities. If the investment is in a city center, the location would pull significant investment for guests because they will be unlikely for providing various facilities for potential residents. This improves the potential to buy hotel room investment.
An essential aspect that can influence a hotel’s success is tourism. Some of the major attractions within a hotel’s locality can influence occupancy rate. As a result, investors must focus on having a research for local tourism.
Moreover, they should make significant efforts for enhancing tourism in the nearby area. Hotels located in luxurious areas such as Dubai Marina, Burj Khalifa and Jumeirah Lake Towers could reap massive benefits for individuals that prefer hotel room investment.
The bookings could also be expected to be coherent without having any specific reliance on tourism. They are some of the best investments offer for potential buyers in UAE.
Essential features of a hotel that can result towards increasing property investment are mainly based on highly experienced hotel management companies. These companies focus on some very important features including service quality and customer service.
They also focus on other hotel amenities including spas, pools and golf courses etc. A good marketing team within a hotel is essential. Moreover, customer care and high quality standards can also help to increase customer retention and profitability. Real estate invest is a viable option to buy hotel room investment.
Hotel room investment options in Dubai
For the purpose of hotel room investment, Damac Properties is also providing opportunities for prospective investors. This can help them for tapping into Dubai's ever increasing hospitality sector for buy hotel room investment. Customers now have an option for investing in an individual hotel room for a future income stream. Moreover, they can also have a free stay annually.
Individuals that want to buy a room and purchase in cash now have an option to own a unit. Moreover, they can also become a part of the ever increasing property market. As a result, an approximate 10% return on hotel room investment is expected on an annual basis.
The potential for having a full ownership of a hotel room in Dubai is relatively new in the country. For the purpose of having investing secured, the hotel rooms are now available along with full ownership rights. They also include title deed.
This allows potential looking to buy hotel room investment or for buy to let hotel rooms to reap significant benefits. Moreover, potential investors have an option to sell hotel room investment at any time. As a result, investing in a hotel has become highly popular in the UAE hotel industry.
The status of Dubai as a world-class business, holiday and leisure destination has been on a growth trajectory. It has gained momentum on a gradual basis.
Due to the upcoming Expo 2021 as well as other property developments that can help to improve position of Dubai at a global level, Damac properties is now developing and providing at least 16,000 additional keys by the end of 2021 for adding it to the existing portfolio of 2000 hotels.
This also adds to Dubai's inventory of premium hotel rooms that can also fulfill the future requirements for luxury accommodation.
How does hotel room investment work?
From a literal perspective, the idea of a hotel room investment is that you purchase a room that is operated by another company. As a result, you receive a fixed percentage in return for a particular number of years. By the end of the fixed year period, the company will purchase back the room from you at a relatively higher price. Irrespective of what happens, you are paid a fixed rate at the end of the term.