@Anders Jax
Thank you for your questions. These are good considerations, and I'll try to put it into context as best I can.
You are right to be concerned, as hotel investing is very different than apartments and even Airbnb. The similarities with homesharing apps, like Airbnb, stop at the nightly lease. Beyond that, a hotel is an operating business that has considerably different revenue management, yield management, and demand patterns.
To your questions:
A. Industry standard management fee is 3.0%. Small motels may charge as high as 5.0% and large convention hotels could charge as low as 2.0%. This management fee is for operational oversight, but all property management salaries and expenses are charged directly to the hotel.
The 8.0% you referred to is probably the franchise cost, and it can vary greatly depending on the brand. Many brands have a license fee in the 4-6% range and a separate marketing fee in that range. The license fee is a profit center for the brand, whereas the marketing fee is spent 100% on brand marketing (e.g. TV commercials, e-commerce, etc.). This is usually sufficient for a small rooms-only hotel, but you'll probably start taking on additional promotional costs when you are selling meeting space or food & beverage.
B. I've never operated an Airbnb, so my only reference point is stories from friends. That said, I would always align with an experienced operator for the first hotel investment. Additionally, most lenders would require you to do the same. There is a lot of room for error in operating a hotel with big margins, but there's also a big learning curve. Whatever benefit you give up from taking on a partner will be worth multiples in experience and avoiding disaster.
C. You can invest in an extended stay hotel to capture a similar guest, but they're two very different experiences. The hotel and homesharing market is reaching equilibrium. Demand for homesharing is starting to level off because the hype is dying and travelers have aligned their preferences. Airbnb is a distribution channel just like brand.com, Expedia, or Priceline is for hotels. There is some overlap, but travelers generally choose their lodging depending on their needs and perceived benefits of each lodging option.
D. Returns depend fully on the level of relative risk. On average, hotels trade at higher cap rates than other CRE asset classes because of the increase operational risk. As a result, cash-on-cash returns and IRRs tend to be higher. However, a value-add deal will deliver a different return to LPs than a core plus deal. As an LP, I would look for a solid preferred return in the 7-9% range and target levered IRR of 11-13% for core plus deals. Add 250-400bps to the IRR for value add deals depending on the renovation scope and projected operational enhancement.
I would say, if the Airbnb thing is working, keep doing it and become the expert. If they really want to branch out into hotels, align with a skilled operator to learn the business before trying to go it alone.
Please feel free to PM me with specific questions or to discuss further.
