Page 32 - IreitEbook

WHAT YOU NEED TO The closer it is to places people deem

KNOW ABOUT LODG-

ING/RESORT REITS worth visiting, the better it’s going to

One-star dives… Five-star resorts… do.

Most of us are familiar with the
Because lodging REITs involve less-
concept of rating hotels according
than steady year-long income, they
to what they offer and don’t offer.
do differ from other REITs in several
When talking REITs specifically
significant structural and legal ways.
though, these properties are
For one thing, these hotel owners
classified less by stars and more by
have to hire an outside source to
titles such as luxury, upper-upscale,
operate their properties.
upscale, midscale or economy; and

by their location, such as urban,
That third-party individual or
suburban, resort, or airport.
entity has to be in charge of all the

establishment’s working parts, from
Location and quality levels are
proper maintenance to hiring and
obviously big indicators in how
managing employees, to revenue
much revenue a hotel can bring in.
collection and distribution.
How close is it to desirable business

centers or tourist attractions? Is it
In exchange, the operations manager
near a beach, a large university, or
typically receives 2%-4% of the
some other “hotspot”?
hotel’s revenue, plus any agreed-

upon bonuses based on milestones
Those answers will automatically
reached.
factor into a hotel’s maximum

revenue per available room
This more often than not leads to very
(RevPAR), which can be calculated
stable dividend production. Some
by multiplying the establishment’s
might even call them boring, and
average daily room rate (ADR) by its
the same goes for their actual share
occupancy rate.
prices.
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