Hotels for Sale in Illinois: Trojan Horses or Unsung Heroes?
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The myth of the Trojan horse is so powerful for several reasons. First, it demonstrates that not all gifts are indeed gifts. Next, it reminds everyone to take a second look at rivals. Finally, it feeds into something that everyone wants: a reward without effort.
Currently, the parallels between hotels for sale in Illinois and the Trojan Horse story may feel like a stretch, but commercial real estate enthusiasts are well within their rights to ask the hard questions. Simply put, are hotels for sale currently Trojan horses waiting to devour, or are they the future unsung heroes of the humble commercial property portfolio?
Travel demand is here to stay; according to the American Hotel & Lodging Association, hotel occupancy rates and the ever-important room revenue figure are both climbing back up to 2019 levels. Cheers to that, and this good news means that it’s not a bad idea to study the market in greater detail. What makes a great hotel stand out compared to just a place to lay your head between pit stops?
Why Hotels Are So Interesting as an Asset Group
Flexible assets are the best assets, and hotels should be on anyone’s list when it comes to flexibility. The modern hotel is far more than just a sign off the highway; they can be fully immersive experiences in their own right.
From murder mystery-themed hotels to total wine and food experience hotels, there’s a little bit of something for everyone within this corner of the hospitality industry.
Hotels are naturally in commercial zones, which means that new operators are already in the right place to generate income. Yet getting the hotel is only the first step: there’s so much more to the process than the initial acquisition. In fact, preparing for the purchase is just as important as the actual purchasing process.
Illinois Incentives of Note for Hotels
Generally speaking, the state of Illinois doesn’t break their incentives down by industry sector. This means that the incentives available apply to more than just hotels. Some incentives depend on whether or not entrepreneurs are looking in underserved areas, which has a specific definition. Since acquiring hotels is also about bringing jobs into an area, these incentives are worth looking into.
One such incentive is the Economic Development for a Growing Economy (EDGE) tax credit.
Another incentive, Advantage Illinois, helps with access to capital. While not everyone will qualify for incentives, the applications are indeed available on the Illinois government website. It’s better to take a little time to apply for incentives and risk rejection than skip it and not make the path to successful hotel operation smoother where possible.
A Grant Worth Noticing
Grants are always on the top of everyone’s list due to the fact that they do not need repayment. Indeed, in the wake of pandemic, new funds were earmarked for Illinois businesses, and hotels can certainly benefit.
Small business grants are ideal for hotel operators, and hotels for sale in Illinois would certainly open the doors for grant opportunities. Vacant commercial property, after all, does not generate tax income for the government at any level.
Given that they don’t require repayment, grants are very competitive. It can feel overwhelming to apply, as the applications are often lengthy. It’s important to study what’s being asked on the form and provide as much documentation as possible.
Key Characteristics for Quality Hotels
Acquiring the right hotel is the goal here; not every hotel will meet the target. Indeed, looking at offerings has to be balanced with the goals for acquisition. What kind of hotel is desired? How large? What is the total budget for acquisition? Once those questions are answered, here are some key points for consideration:
- The average daily rate. Knowing the daily rate on each room is key to calculating value.
- The number of rooms. The number of rooms truly does make a difference.
- Revenue per available room. This metric is shortened to RevPAR in reports, and is derived from dividing the total room revenue by the total number of rooms in the time period specified.
- Cost per occupied room. How much does each room cost the hotel when it’s occupied?
Hotel valuation methods will vary greatly, as every hotel is a little different. Metrics only tell part of the story. What is the location like in terms of traffic patterns? Is the hotel easy to get into? Is it easy to get out of? Is the area consistent throughout the year, or wildly prone to seasonal tourism?
Do the hotels cater to business travelers primarily, or families with children? The more questions that can be asked during the evaluation process, the better.
Acquisition Is Only the Beginning
It’s great to focus on acquisitions; in a way, that’s like going to the grocery store and getting excited about all of the combinations to try and enjoy later. However, getting home and putting the groceries to good use is the important part.
Far too often, the vegetables that were slated for great purposes end up withering away because plans and action are still two separate concepts.
Don’t allow that thinking to cloud hotel acquisition strategies. The operation of the hotel is just as important as the acquisition.
So, are hotel opportunities in Illinois worth it?
Trojan horse, or unsung hero? For businesses trying to recover, the modern hotel might be a little bit of both. Indeed, hotels can share customers with other types of entertainment centers, like restaurants. After all, travelers have to go eat somewhere, and after they finish eating, they want to go lay down and rest.
When vacancies get filled, and businesses go back to operating at full capacity, everyone benefits. Customers are looking to spend money, have a great time, and take care of their families. People need jobs, and business owners have their own role to play in all of this as well.
The commercial real estate ecosystem can feel very fragile, but it certainly has a large mission: to get people back to work and take care of the community. If that’s not the point of business, then what’s the real mission?
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