Are hotels always more profitable than apartment complexes?

[Account Closed]

Common sense, along with my own research, would tell you that a hotel is a more profitable investment than an apartment complex. They are basically the same building, except that hotels charge a higher rate and the guests turn over faster. Much more rent is collected from a hotel.

To give specific examples, there is a $4,500,000 hotel for sale in Orlando, FL that profits $1,100,000/year.... there is also an apartment complex for sale for $5,300,000 that profits just $540,000/year.

How do these two types of properties act in a recession? Obviously, people will always need a place to stay, but they might not necessarily need luxury vacations when times are hard.

Still, all things considered and all other factors remaining the same.... I think hotels would make the better investment.

[Al Williamson]

I think this is an apples to oranges comparison. The hotel's traffic count and location have everything to do with its profitability. The hotel's bar, restaurant, parking fees, and affiliate arrangements are counted in its bottom line. Hotels spike their prices when conventions come to town.

I don't know if that residential apartment complex is operating like a commercial business. All apartment have the potential to be more savvy, but the status quo apartment has lots of room for innovative asset management.