Can You Buy A Hotel Room – Five solid reasons why you should buy a hotel room in Batumi instead of an apartment if you’re thinking of investing in real estate for income.
If you are reading this, I assume you are looking to make a real estate investment that will generate an annual return. Know this, because you are not alone. According to a survey conducted by the Ministry of Finance and Economy of Adjara in 2019, 66% of all investors buy property in Batumi for potential future cash flow, rather than for personal residence.
Can You Buy A Hotel Room
Now, the traditional way to make such an investment in Batumi would have you buy an apartment in one of the up-and-coming high-rises, and then inevitably have to find a third-party agency to manage it to generate rental income.
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Since you are visiting our website, again I will assume that you may have been looking to learn about our competitors. I say “competition” very carefully, knowing that our product is very different from what is currently available on the market.
Although investing in hotel rooms is a proven strategy for high and stable returns around the world, it is a fairly new concept for Georgia and the region. So today let me give you 5 reasons to buy a hotel room in Batumi:
According to a survey conducted in 2019 by TBC, one of the two leading banks in Georgia, 80% of construction work in Batumi is in residential buildings, compared to 15% occupied by hotels. From 2014 to 2019, more than 35,000 apartments have been added to the Batumi market supply, and an additional 1,235,000 square meters in 130 residential projects are expected to be delivered in 2019-2021.
Even with the arrival of Airbnb in the market, data shows that international travelers are more likely to book a hotel (48%) than an apartment (34%). And the share of hotels among overnight stays is growing.
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Now, Batumi may have been one of Airbnb’s trending destinations in 2019, but AirDNA shows an average annual occupancy of just 27% (up 48% in August, down 7% in October) and that’s from the 4,878 listings they received Without any reservations.
Of course, there are other ways to rent apartments besides Airbnb. With few exceptions, the city’s rental market is generally unregulated and largely untaxed. This creates opportunities to generate income, but there are no strict reporting obligations. Since hotels do not have these loose terms, you can expect to be more confident and secure in the annual rental income statements delivered to you after you invest in a hotel room.
TBC Capital’s latest research shows luxury and luxury hotels boast the highest occupancy rates at 66%. Of these, the vast majority are brand hotels. Local apartment developers are leveraging these brands by setting up branded hotels on their premises. Names like “Marriott” or “Wyndham” on the side of the building carry an exorbitant price per square meter and serve as a good selling point, luring investors with a false sense of security. But the fact is this: If you buy an apartment with the intention of earning rental income in a building with a brand-name hotel, you’re putting yourself at a huge disadvantage. A thorough examination of the purchase/management agreement will reveal that the brand is not actually responsible for managing your apartment. In fact, you’ll find that you’ve put yourself in direct competition with the brand, without access to the hotel’s facilities or its extensive marketing tools. Which brings us to common sense #2.
Unlike individual apartments, hotels have more reliable and comprehensive means of booking their rooms, not least of which is a growing selection of third-party booking sites. With facilities that allow for all-inclusive packages, hotels can count on cooperation with travel agencies for booking individual rooms, but more importantly – group tours. The latter contributes significantly to the overall occupancy of the hotel, as well as to securing advance payments.
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Since the start of the city’s revitalization in 2012, the local government has put a lot of emphasis on gambling to attract visitors to the area year-round. And although with government incentives most casinos are located in hotels, they have a very limited number of rooms for their private use. Thus, the casino management often has to look elsewhere for accommodation for the big owners. Such arrangements usually mean that casinos keep quality rooms for months, so they can comfortably accommodate their biggest spenders.
It is for this reason that Seaside Park Hotel – the most luxurious and expensive boutique hotel in our portfolio – is strategically located within walking distance of current and upcoming casinos.
Now, you may think this all makes sense, but do we have enough experience to ensure such results?
Since our inception in 2012, demand for Roibush Hospitality Group properties and services has grown rapidly. Like many in the area, we started by helping investors buy, renovate and manage vacation rental properties.
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While we have quickly changed our investment strategies to focus on more stable and profitable hotel development, we remain committed to nurturing the investments made by some of our early clients.
A quick search on Airbnb will return at least ten properties in the top 20 results at any given time. In 2019, we managed 70% of the most profitable properties in Batumi. From June 2019 to June 2020, our average occupancy rate was 84%, and we received over 1,200 5-star reviews on Airbnb.
We have a hand-picked list of trusted agencies that we have worked with over the years. Our selected properties with stunning views of Batumi Beach have become a prominent feature of many vacations during this time. Currently, we receive our bookings through three main channels: Airbnb, agency bookings and bookings through our own portal: BookingBatumi.com.
BookingBatumi.com is a complete direct booking website exclusively featuring our properties. Guests can make a reservation through online subscription with no third party commission. And even though it’s not even a year old, it currently carries around 30% of our total bookings. We like to think of it as the first step in realizing our company’s ambitions to completely change the landscape of hospitality in Batumi.
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Over the past three years, the increased supply of rental housing has led to a slow but steady decline in rental yields, TBC Capital research said. According to PMCG Hospitality Market Research 2019, apartments or hotel suites in Batumi rent for an average of 50-100 GEL per night, while a hotel room in Batumi will cost you between 137-384 GEL per night.
Our own data provides the same evidence. From an average nightly price of $76.90 in August 2018, we saw a sharp and steady decline, to an average of $55.90 in August 2019 and $45 for August 2020. Even with the high level of occupancy and above average rates, the profit margin of our rental apartments is much lower than what we expect for our hotels. This is partly due to the fact that in terms of management, hotels require much lower operating costs to operate efficiently and therefore can provide better service.
If you take a closer look at our projects, you will soon notice that we focus exclusively on boutique and lifestyle hotels, mostly luxury or ultra-luxury hotels. In addition, although they are different, all of our projects are created with the big picture in mind. Their facilities support each other, creating a network of accommodation, dining, culture and entertainment that can keep visitors engaged and entertained for longer.
Our boutique properties vary in style to suit specific demographics, all housed in a small number of rooms to ensure the highest possible return for our hotel room investors. With our current projects, we intend to create a new tourism ecosystem, for visitors looking for a more sophisticated and personalized boutique hotel experience. Therefore, all our hotels are positioned to cater to the top 25% of their assigned price bracket.
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Buying a hotel room is one of the most practical investments you can make. As mentioned in the previous section, hotels require a much smaller operating budget per unit for effective management.
For example, we currently have a hospitality staff of 6 housekeeping and guest services professionals dedicated to servicing the 20 vacation rental properties under our management. The same staff is sufficient to operate twice as many hotel rooms in the same building, while significantly reducing logistics costs. This, of course, directly improves your earnings as an investor and increases your annual return on investment.
Being the owner of a hotel room provides transparent reporting, and since your earnings do not depend on the use of your room – a stable income. With cameras and staff
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