As a real estate investor, chances are you probably want to stick to relatively safe properties that will deliver a high ROI within the next five years and avoid the ones that are a bit of a gamble. In this regard, you’ve probably steered clear of hospitality, gaming, and leisure properties because their status has been somewhat unstable in the past year. Many companies, some well-established, did not manage to survive the crisis and made room for those who could innovate and find new ways to pivot in the era of disruption. However, it’s also worth pointing out that the crisis will not go on forever, and you might not need to erase these properties from your portfolio altogether. Instead, it’s essential to look at the state of the industry as a whole, analyze the trends forecast, and see how you can incorporate the changes into your investment strategy.
Regional expertise is a must.
The Hospitality, Leisure & Gaming industry is deeply influenced by the local economy, tourism in particular, so deciding whether to invest in it without having regional expertise would be unwise. For example, if your portfolio included vacation homes in a city that was never too popular with tourists, to begin with, or a casino in a country whose government took an anti-gambling stance, then it makes sense to let those properties go. One interesting case study is the one of the US, which has long been home to gambling businesses. While Las Vegas will continue to be a mecca for casino enthusiasts for years to come, many other cities are starting to change their image from gaming cities to family-friendly cities. So, if you want to invest in gaming properties, you might want to consider foreign markets.
Take Colombia, for example. Here, gambling regulations have recently been changed, and the casino industry is booming. The popularity of slots online colombianas continues to grow, and even foreign operators are considering moving here. Colombia, along with several other South American nations, might even be the future of the casino industry.
One of the biggest mistakes a real estate investor could make is assuming that a sector will perform the same way regardless of the location. For example, in North America, the rise of online gambling has led many land-based casinos to become obsolete, whereas, in Colombia, casino games like ruleta are just as popular both online and offline.
So, before you enter a new market, make partners there, someone who can give you local insights into the state of the economy, market trends, and legislation.
What properties have the highest chance of driving growth?
Contrary to common belief, hospitality, leisure & gaming real estate isn’t necessarily doomed. Even if the industry was set back by a few years in 2020, that doesn’t mean all investments in it will be failures. But, at the same time, it’s also true that properties will not grow and develop in the same way.
For example, hotel mega-chains will most likely continue to be profitable simply because they have a brand name to support them. Also, they were among the first to adapt to the new rules and post transparency notices about following hygiene and social distancing protocols. Low-cost accommodation is also expected to bounce back because there will be great demand for these once people are allowed to travel again. The same thing will happen with business hotels and countryside vacation properties, so these might be ripe for investment. Unfortunately, mid-range properties are expected to take the heaviest blow because they’re not big enough to have branding power, and they’re not quite affordable enough to be competitive.
But, more than anything, hospitality experts talk about the revival of resorts – large complexes with hotels, restaurants, spas, casinos, and other entertainment venues, where tourists will have everything they need. Investing in resort properties is definitely more expensive, but, considering the state of the industry, it seems that tourists are interested in the complete experience when going on vacation. In places that have friendly gambling legislation and locals love playing slot games, investing in casino venues within a resort can be a fantastic way to grow your wealth. Resorts are especially popular among senior travelers with high disposable income, but experts also forecast that families will also start choosing them thanks to their convenience.
Why it’s important to think outside the box.
In a traditional real estate investment strategy, you sell or rent out the property exactly for the reason for which it was built. For example, if you have a hotel, the venue will function as a hotel, or it won’t be open at all. That may have worked a while ago, but now it might not be such a good idea because most owners can’t afford to have an inconsistent cash flow for such a long time. Instead, you might want to consider repurposing hospitality properties.
For example, given the widespread popularity of remote work, many hotels are pivoting and renting out their rooms as office space. It’s a brilliant move, not only because it shows great innovative spirit, but also because it capitalizes on an increasing demand. Starting with 2020, when remote work culture took off, more and more people have realized that they don’t have enough space and privacy at home, but they’re not ready to work in an open space again just yet. Renting a hotel room by the hour seems to provide that perfect middle ground, and the hotels that have converted into office spaces already report great earnings. You can use this strategy as a safety net until things get back to normal, but many hotels plan on keeping this service indefinitely. And remote offices aren’t the only option. Many hospitality properties have been repurposed as temporary homes for first responders or shared family homes.