As a lifelong hotelier in Las Vegas and Sonoma Wine Country, I agree with @John Wijtenburg's assessments. For those of you wondering what type of returns to expect, the only true and correct answer, in my opinion, is it depends.
There are so many factors that play into profitability, market penetration, and a successful operation. From a 30,000 foot view: How has you comp set performed over time? What might influence it in the future? What new builds or existing hotels changing flags are happening now or in the future?
Getting more granular, what classification of hotel are you interested in (luxury, upscale, select service, convention, etc)? Does it fit the market? How does the competition in your classification in the market look? Does the local tourism bureau have strong leadership with a good vision? What management company are you using? Will your hotel have food and beverage? This is a huge one.......if you ask 100 hotel developers, I'm betting over 95 will tell you they wish they could operate without food and beverage.....it's a money pit. And, what about unions? Are they present in the market? That's also a big factor.
As you can see, there are many considerations. Some can be easily overlooked. For instance, in some markets with very high cost of living like mine, your ability to staff the hotel becomes a nightmare. In Napa, I know of a hotel paying for a shuttle bus to bring housekeepers to work and home from cheaper cities a half hour away, since they cannot afford to live in the area they work. This gets quite expensive as you might imagine.
Now that I've painted this horror picture, I should mention there is plenty of upside. Many owners will purchase a struggling property, rebrand it, renovate, stabilize, and either sell or cash out refi. This of course takes time, effort, and great partners/boots on the ground to nail down, but can be just as or more financially beneficial as multifamily.
Good luck to those considering hospitality. I live it, love it, and wish I owned it.
