This riddle will be tough only for smart investors and those who tirelessly follow the news of the real estate market: not a hotel, but with hotel service; not a residential complex, but offers comfortable accommodation; does not require large investments, but promises considerable profits - what is it? All this combines a rather young, for our country, commercial real estate segment – apart-hotels. They appeared in Ukraine not so long ago, but have already proven themselves and demonstrated their competitiveness. Having adopted the experience of foreign colleagues, domestic businessmen boldly set out to expand the usual framework of the Ukrainian real estate market. It's time for you to grab new opportunities.
The apart-hotel phenomenon and its origins
In essence, an apart-hotel is a residential complex, the maintenance of which is not carried out by the usual housing office or condominiums, but by a special company that adds auxiliary options, often used in hotels, to the basic services and services. Individual apartments are not just purchased for a few days, but are fully rented for the period that the tenant determines for himself. As in the case of renting residential real estate, certain time frames are established and conditions for early termination of the contract are stipulated. Just like in the hotel business, demand is often influenced by seasonality, so the management company takes responsibility for rental conditions and improving business efficiency.
The terms of cooperation largely depend on the company and the concept it adheres to in its activities. Apart-hotels, as well as hotels, may differ in their star rating and target audience. The more status a hotel has, the more attractive options and additional amenities it has. Thus, the most developed facilities can offer their guests larger residential properties with additional sleeping places and work areas. Thus, the format changes, and the client receives a spacious room, which is more like not a hotel room, but an apartment (except for the absence of a full kitchen, of course).
“As close to home as we can make it” or “a home away from home” - the emergence of apart-hotels began with this simple idea in the 1970s. The author of the new living concept was Jack Debord. He brought this bold idea to life in Kansas and named his brainchild “The Residence Inn.” It was planned that for several months, weeks or at least days, an ordinary person would be able to escape from routine and relax. What is most important is to relax at home.
The new approach appealed not only to Americans, but also took root in Canada, the UAE and many other countries. It is especially popular in Dubai. Many investors purchase several similar rooms at once for rent, and reserve one for themselves. Agree, living in your own apartment and daily enjoying all the amenities and benefits of a hotel is the dream of many and the reality of a few.
What does an investor need to know in the apart-hotel segment?
First of all, you must define your target audience. Although the business is managed and operated by a separate company, understanding the processes and principles will help you ensure that you are making the right move by investing your savings in this segment. The most frequent guests of apart-hotels are:
- students
- migrants
- tourists
- businessmen on business trips
- entrepreneurs
- digital nomads or digital nomads
- representatives of the millennial generation
In general, adherents of this type of living are young and successful people who do not want to be tied to one place for a long time, but need the comfort of home. Renting a room in an apart-hotel can last for quite a long time; quite often it even develops into a gradual purchase of real estate. Comfort and service are what self-sufficient individuals who value their time are looking for.
As you can see, there are plenty of people who want to live in an apart-hotel. Therefore, we can safely move on to the stage of making money. You can choose one of the investment models that seems most convenient to you:
- share model – investing directly in part of the apart-hotel itself
- purchase of apartments - you become the owner of specific rooms and make a profit directly from their rental
By investing $100,000 or more, you become the owner of commercial real estate and receive a monthly profit. Management, searching for clients and other issues are handled by the company with which you sign the corresponding agreement. For greater convenience, many companies have a special installment program that allows you to stretch the payment over 12-18 months with a down payment of 30-50% of the total amount.
Apart-hotels are being built in a picturesque area with convenient transport links and well-thought-out infrastructure both on the territory of the complex itself and nearby. This circumstance alone simplifies the process of searching for a suitable place. Hotel service, home comfort and the possibility of both short-term and long-term rentals significantly expand the functionality of apart-hotels compared to typical hotels or residential complexes, and therefore the monthly profit and total profitability from the property can significantly exceed the average earnings for similar residential properties.