Purchasing a hotel business when the property is rented?

[Jami Kloet]

I apologize if this is in the wrong section - I thought there used to be a hotel investing section. 

I've seen a lot of discussion of sub leasing rentals for AirBNB purposes lately. 

I was recently poking around a business opportunity for a small hotel (21 rooms) that rents its space in a large commercial unit. 

Essentially, a large portion of the commercial space is rented to an indie hotel operator - I guess just like any business that rents from a commercial owner. The hotel business is for sale, and buyer would assume the lease agreement. 

I'm sure it's been done before, but what would be some things to consider if purchasing a hotel business that doesn't own the land it operates on? 

I can't decide if this is a fantastic formula or a faulty one, but it's something I would like to explore a little deeper. I always just assumed a hotel purchase would include the land/building it operates on. 

The commercial plaza it is in is also for sale, though isn't something of interest to me, but wondering how that would play into the investment. 

Just looking for some thoughts from those who have experience in hotel investing. I've always wanted to get into vacation rental or hotel investing, and this is just something I haven't come across, though I am sure it's not new. 

[Paul Sandhu]

@Jami Kloet  There is a reason the 21 room hotel is up for sale or lease.  Someone is probably not making money, or the money they are making is not worth the time or effort that they put into it.  There could be some competition that you don't know about that is cutting into their revenue.

I started with 1 STR in this town, now I'm up to 23 with 82 beds. There were 2 cheap motels in this town back when I had just 1 STR. All 3 of us rented to the same clientele, refinery contractors. My business has grown, one motel changed hands and the new owner isn't very happy. The other motel shut its doors 2 years ago. I might have 20-40 people stay with me an average week. The motel that is open might have 5 (and he has the monopoly on cheap motels).

You'd be better off purchasing a SFR and turning it into a STR. There is a reason the hotel lobby is fighting against the STR industry, it's because the STR industry is taking money out of the hotel industry. Why invest in a hotel? You have control over all the variables. Just do your research first.