![]() ![]() In areas where demand greatly outpaces supply, hotels tend to perform well. Over Saturation: The performance of hotels are directly tied to supply and demand. As interest rates drop, however, borrowing costs help hotels retain more profits. When rates are high, it costs more to borrow the money they need to remain operational. If for nothing else, hotel REITs borrow a lot of money. Interest Rates: Perhaps nothing is more influential on the performance of hotel REITs than interest rates. That’s not to say hotels are going away anytime soon, but rather that there may come a time when they need to adapt. Companies like Airbnb and VRBO are already starting to chip away at the market share of the travel and leisure industry. ![]() However, the entire sector is ripe for disruption. Industry Disruption: The hotel industry is alive and well, even as the pandemic drags on. As a result, it may literally pay to learn the potential risks associated with hotel REITs: In fact, hotel REITs are generally viewed as one of the riskier investments in the REIT sector. Not unlike every other investment strategy, investing in hotel REITs coincides with an inherent degree of risk. To be fair, any REIT must meet these requirements, but hotel REITs do so while investing specifically in the hotel industry.Īny stock with the potential to generate wealth also has the potential to turn into a bad investment, and hotel REITs are no exception. ![]() No more than 50% of a hotel REITs shares can be held by five people or fewer Hotel REITs must have a minimum of 100 shareholders In order to be considered a hotel REIT, the business must be classified as a corporationĪll hotel REITs must be managed by a board of directors or trustees Hotel REITs must derive at least 75% of their gross income from rents, interest on mortgages financing real property or from sales of real estateĮvery hotel REIT is expected to pay at least 90% of its taxable income to shareholders in the form of dividends Of course, in order to be considered a hotel REIT, the business must simultaneously meet the following requirements:Ī hotel REIT must invest a minimum of 75% of its assets in real estate The following will detail what a hotel REIT is and how investors may be able to use today’s developing trends to beat the market moving forward.Īptly named, hotel REITs are businesses which own, finance or operate income-producing real estate assets associated with the hotel sector. Hotel REITs are expected to benefit immensely, and savvy investors who play their cards right may be able to do the same. In an attempt to make up for lost time, more and more people are expected to travel soon, which means the stagnant hotel industry is expected to see an influx of business sooner rather than later. Today, the threat of the Coronavirus (and its subsequent variants) is just as real as ever, but the economy is gaining momentum. ![]() As a result, hotels have underperformed the market over the last year and a half, but the tides may be turning. Travel and leisure was one of the hardest-hit industries globally as each country quarantined in its own unique ways. In the wake of the pandemic, hotel REITs were hit particularly hard for obvious reasons. However, it is worth noting that while REITs have done well in recent history, there’s still a sector that is brimming with opportunity: hotel REITs. Over a 15-year period, in fact, actively managed REIT investors have averaged an annualized return of 10.6%. REITs are growing increasingly valuable in today’s volatile market, providing a way to build wealth through income. Real estate investment trusts (REITs) represent some of the best hotel stocks to buy. ![]()
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