There is a quote that says one should not expect to get rich by building a hotel; rather, you should already be wealthy before considering building a hotel.
This statement is not entirely incorrect, nor is it entirely correct. However, it is certain that building a hotel requires a substantial amount of capital, and the return on investment (ROI) is relatively long-term.
Even at the early stages, when the hotel is starting operations, sufficient working capital is needed to keep things running until the revenue from the hotel's operations is able to cover its own expenses. Given this condition, it is not surprising that only those with substantial capital have the capability to build a hotel.
This raises the question: Why are so many owners and investors still interested in building hotels? What makes hotel construction attractive? The primary motivation for investors building a hotel is not to chase after revenue or profit in terms of cash flow.
When an investor intends to build a hotel, the main motivation is to convert accumulated cash into a solid asset. Keeping a large amount of cash for an extended period is unproductive because its value is eroded by inflation. Building a hotel not only creates a solid asset but also a productive one that can be enjoyed and has prestige.
Moreover, when the hotel operates well and is managed by good management, it will also generate recurring income as an asset. In comparison, investing in precious metals (like gold) does not produce recurring income. This is why building a hotel can be more advantageous than investing in precious metals.
A well-designed and well-built hotel in a good location will have a higher value compared to the total costs incurred during construction, and its value will continue to increase over time. The key to maintaining optimal asset value is to perform continuous maintenance to keep the asset in prime condition.
Simply pursuing monthly income at the expense of maintenance programs is counterproductive. The losses from a decline in asset value far outweigh the capital gained from operational results. The greatest benefit investors get from owning a hotel is the increase in asset value.
When the hotel is well-operated, it can be used as a valuable collateral with a higher value than the initial construction cost. The funds from the hotel collateral can also be used to build another hotel at a different location. However, it is not advisable to finance a hotel with more than 50% loan as it would put a heavy burden on the hotel’s operational income.
Are you interested in building a hotel?
About Writer :
Ojahan Oppusunggu : Former Technical PM – DTS ACCOR Indonesia & Malaysia, Former CTO of Topotels Hotels & Resorts, Former Director of Technical & Technology of Artotel Group and Currently as Project Director/Owner Rep. Kapuk Hills Hotel Jakarta – Handwritten Collection
Comments