ATLANTA—Hotel ownership may now be a reality for almost anyone. HotelierCo and Regulation A+ crowdfunding are making it possible and affordable to invest in a hotel.
Regulation A+ legislation allows nonaccredited investors to invest up to 10% of their annual salary or net worth, as long as they’re over 18 years old. The start-up began accepting investors in July, who are brought on board early during development.
“We are currently focused on U.S. investors, but intend to open up HotelierCo investment opportunities globally,” said Nathan Kivi, CEO of HotelierCo. “Ideally, we would love every possible person to invest.”
Focusing on boutique, luxury, lifestyle hotels, HotelierCo is accepting investors for its first property, The Ewing Hotel in West Cape May, NJ, scheduled to open in 2021. It will be managed by Valor Hospitality Partners.
“With each raise, we will focus on investors that are likely to be guests at the hotel property. Having our owners also market the project to friends and family is a huge benefit. For example, the development at West Cape May will focus on finding investors in the main demand markets for the hotel: New York, Philadelphia and Washington, DC. What could be more exciting than being a hotel owner? Having access to stay as an owner,” Kivi said.
According to the CEO, each investment will be slightly different, but the first available is an equity ownership for a hotel development.
“The development is broken up into $500 a piece non-voting shares. The value of the shares is based on the cost of the development without dilution to investors,” he explained.
Simply put, the investment opportunity blends real estate with business, thus creating more leverage. Kivi added that because hotel prices fluctuate daily, rates shift in real time with the market, allowing hoteliers to work at a faster pace than other real estate properties.
“Investors will have access to an asset class that would otherwise be unachievable for such small investment increments,” he said. “This will allow investors to diversify their investment portfolio across markets. Investors will also be able to utilize the investment and receive an owner’s discount, with the discount being a direct pass-through of what an online travel agent would be otherwise taking as a fee.”
Properties are handpicked by both HotelierCo and Valor Hospitality Partners’ teams, focusing on the boutique, lifestyle segment, which, Kivi explained, are investments that are aspirational for owners and also maintain a disciplined approach to investing.
Kivi noted that the company plans to launch a fund with a boutique flag in early 2020 and introduce a preferred equity piece of a lifestyle portfolio toward the end of 2020.
Kivi added, “We are creating a new basis for hotel ownership. This will democratize current hotel ownership. For hotels, we believe the new ownership base will also become a built-in marketing and loyalty platform, fueling demand for the asset and resulting in improved revenue.”
HotelierCo is currently entertaining deals based on risk, return and the market rather than on location. Kivi said, however, that the company pays attention to markets that can support boutique, lifestyle properties.
“This includes markets that can support higher average rates commensurate with a higher-end product,” the CEO explained.
The company also plans to grow its footprint internationally after it establishes a solid domestic foundation. Having Valor Hospitality Partners as a management partner bolsters this goal, Kivi said, as the company has a slate of properties in the United Kingdom, South Africa, Dubai and Hong Kong, and the hopes of expanding even more.
“We’re also aiming to allow secondary trading of non-voting shares,” Kivi said. “We are looking to build out a platform that will help facilitate off-market trading of investments, but this will be largely dependent on the overall growth of HotelierCo. Investors should not make any investment decisions based on being able to trade these illiquid assets.”
HotelierCo also plans on building an app for easy access to investments, booking owned hotels and secondary trading—if possible—of the investment shares, Kivi noted.
“The positive outlook of the travel and tourism sector, promising hotel operating revenues and a potential higher return on investment versus other asset classes continue to push investors toward hotel real estate,” Kivi said. “However, finding investments that meet the tough return profiles required for institutional money has become increasingly difficult.”
The industry continues to find ways to adjust to this, Kivi noted, with a shift in fundraising to debt strategies.
“This presents an alternative way of accessing the sector, allowing investors to achieve favorable risk-adjusted return through loans secured by the underlying hotel real estate,” Kivi said. “The strategy has become more attractive as interest rates rise and property yields come under pressure.”
He continued, “As these alternative strategies for holding hotel real estate become more common, we intend to provide investors diversification across individual hotel assets—bringing hospitality opportunities in both debt and equity as we grow the platform.” HB