Nor had they responded actively to “request for proposal” solicitations from large local businesses. Active management in this area can increase occupancy substantially over the year.
A greater number of guests means more revenue opportunities elsewhere. The restaurant can be a strong source of income if the menu is appropriate – if you have lots of stag and hen parties at the weekend, a pint-and-pizza weekend deal can generate attractive returns.
During the week you might offer evening meals pitched at the corporate guest who wants a decent meal and does not have the appetite to go exploring just to eat alone.
Attractive returns
In short, good management can increase profitability considerably. This has a beneficial effect on capital values, as hotels are valued on a multiple of their earnings.
So what does this mean for property investors?
Budget hotels in the UK provinces may not offer the same glamour and allure as a Mayfair house or a Gherkin-style skyscraper, but they can generate very attractive returns indeed for an investment manager with the right expertise and contacts.
If the pooled ownership model is structured in the right way, these properties can also qualify for business relief, helping investors to reduce their IHT liability.
Jonathan Gain is chief executive of Stellar Asset Management
