Why the Hotel Industry is Always a Good Choice for Investors
Many issues are facing the world at the current time with the majority of investors looking for safe ports in the storm that could come towards the end of the current financial year. So far, the arrival of the coronavirus pandemic and the ongoing price war over oil could bring about a series of problems in the global economy that leads to a series of recessions. Investors looking for a safe sector to store their money will usually find themselves looking for stocks in major corporations where dividends may be small, but the size and security of the company supersede the dangers of recession, such as the hospitality industry.
Judging the best hotel stocks
At a time of financial instability, the majority of investors look for hotel stocks to buy that offer an excellent way of achieving their long-term goals. Hotel stocks are known to be affected by the volatility of the markets with any changes in the economy reflected in the number of guests making their way to each hotel. Although the overall market for hospitality can be affected by the stock market, most hotel chains are well known for being an excellent choice for those seeking a long-term investment.
Despite the volatility that can be seen in the markets for hotel stocks, the chances of losing a large amount of money with these investments are low. One of the most important things to remember when choosing to invest in hotels is the fact the market for this area is cyclical. This means that any short-term losses are usually made up by an investor who has the wherewithal to hold onto their stocks for the long-term.
What to look for in a hospitality investment
Several different options should be explored when an investor is looking for the correct hotel investment to suit their needs. For a long-term investment, the major chains are always a positive option, but some statistics can make the move into the hospitality sector a little easier to complete. The average daily rate charged by the hotel per room is one of the most important statistics that need to be explored by an investor. Alongside a complete understanding of the market a hotel is operating in, the average price per room is a guide to the success it is currently achieving.
Choosing a chain
Before investing the investor must have a complete understanding of how the chain they are looking to invest in is performing year on year. For the highest long-term returns, a chain that is clear in its approach and has expansion plans should always be high on the list of investment options. Taking the Marriott brand as an example, the dividends paid each year are low, but the brand has achieved regular growth in a range of markets meaning the lower dividend is offset by a low chance of losing money regularly.
Factors that could affect the hospitality sector
The major issue facing the world in the coming months will undoubtedly be the continuing issue of coronavirus that could have knock-on effects in many different areas of life. The Guardian reports there is a chance the closing of borders across Europe because of the virus will result in the European Union imploding as a coming recession looms large on the horizon.
What must be considered are the factors that had already arisen before the arrival of the coronavirus pandemic, including the falling occupancy rates that had already been forecast for 2020. Despite the falling occupancy rates, the higher room charges that are available should have offset the losses that were forecast following the completion of many new projects in various locations that were begun in 2017 and 2018. The latest location openings will have a positive effect on the market and allow investors to feel confident that following the end of the coronavirus pandemic the hotel markets should rise once more.
If the worst-case scenario for the hotel sector can be avoided during the current medical crisis, the return to normal life that will occur sometime in the near future should see a return to profit for many of the largest brands.