Tell me about hotels

[Jon Holdman]

Tell me about investing in a small(-ish) hotel.  I'm talking something in the $1-3 million range, 25-60 rooms.  I realize this is as much a business as a real estate investment.  Is this something that requires constant attention or can you hire a manager to deal with day to day operations and then oversee the business?  I've stayed in a few where it was pretty clear the owner and family where living right there.  That's not what I have in mind.  (OK, maybe a possibility on some Caribbean island, but that has a whole additional set of issues.)  How much staff does it take to run one?  

What is financing like for these?  I'm assuming commercial terms, like 30% down, 20 year amortization and a 5 year balloon.  In another thread on commercial financing, I saw that commercial loans are limited to your net worth.  Is that the case for this?  Are such loans available?

What does it take to get branded?  Can you compete with the big chains as an independent?  Or is it better to consider properties that are already branded?  Branded ones do see to be offered at lower cap rates than non-branded ones.

What are expenses? Looking at Choice Hotels financials, their operating income appears to be 26-28% of revenue over the last five years. OTOH, IHG (Holiday Inn, etc, etc) in Americas reports 62-64% of revenue as operating income over the last three years. Worldwide, they report 35-41%. That's a big difference. Does that reflect the difference in low end hotels vs. high end, business hotels? La Quinta reports 8-18% for the last five years, though they show a large "impairment loss" in the last three years. That appears to be associated with pending sale of some hotels and reflects a decline in the value of these properties. Taking that out, their NOI appears to be 14-18% of revenue.

Is this a viable long term business or does AirBNB, VRBO, etc eventually kill hotels.

What's a good resource for learning about hotel investments?