During the last few years the increase in sales of Hotel Rooms being sold on a
buy to let basis has been phenomenal. Originally starting in the United States
the concept spread to Europe in 2003 and this area of the leisure industry
continues to show impressive growth.
There are many variations in the market place but the underlying theme of all
projects is that the purchaser buys a hotel room for the period of the project,
deriving a share of the income from its letting. This can be on the basis of a
fixed sum per night let or a percentage of the gross or net revenue for the
room. A standard project would provide returns of between 4% and 8% on the
purchaser’s money whilst obviating the need of the hotel operator to obtain
large and often onerous borrowings.
The maintenance of a high standard of décor and furniture and fittings of the
hotel is promoted by it being in the interests of both purchaser and manager of
the hotel, as they both receive a share of the income.
At the end of the specified period the hotel is sold with all parties sharing in
any resulting capital appreciation, whilst in the interim, the purchaser is at
liberty to sell his own interest on the open market.
There has, however, been one hindrance to expansion of the sector, in that the
legal structures under which sales have taken place have either left the
investor with little security, if faced with the failure of the operating
company, or a cumbersome and complicated legal structure involving costly
subdivision of the property and long winded registration in the relevant
property register.
Citadel and its directors have successfully cut through this mountain of
bureaucracy and have developed documentation which involves a single
registration for the whole property which is then held in trust for the
purchasers and the hotel operator alike. This allows for cost effective and
streamlined day one “conveyancing”, easy transfer of interests during the life
of the project and trouble free sale at the end of the project.
Take, for example, the scenario where a 100 room hotel is ready for sale at the
end of its planned life. The absence of a single signature could delay or even
abort the sale to the detriment of the other 99 owners. Citadel’s structure
overcomes all these issues and offers a degree of flexibility far beyond the
rival structures.