Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.
Limited-service hotel supply has grown every year since 2013. 70% of all the hotels being developed now are “limited service.”
What is a limited service hotel?
The term limited service hotel is used to describe budget-friendly hotels that offer accommodation without a food and beverage component like a restaurant.
Why are so many being built?
They are among the most profitable of the hospitality property types.
They are also less labor intensive because they have less beverage space and virtually no meeting space. So, while you still need the full complement of housekeepers and desk staff, you’re not as dependent on labor. One of the things people are concerned about looking forward are labor costs and labor availability.
In addition, limited-service hotels also require less land for construction.
Today, many travelers staying at hotels in prime markets don’t necessarily want to eat and drink at the hotel restaurant. They prefer going out for local food and experiencing the city…so location might be more important to them than the amenities inside the hotel.
Additionally, the increase in food delivery services, such as DoorDash and Uber Eats, further strengthens the limited service hotel appeal as in-house dining options are no longer a necessary requirement for business travelers.
The reason these hotels work very well in prime markets is they can have a fairly small footprint, so they don’t need a lot of land, and they’re very efficient to develop and own. So you’re going to be putting a majority of your money (2/3 of your development dollars) into rooms which generate a pretty high profit.
Summary
Developers like them, lenders like them, owners like them and guests like them. So we will see more of them.
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About Beau Beach, MBA CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@BeachwoodSells.com