Understanding Different Types of Hotels for Syndication

Hotel real estate syndication presents a compelling avenue for investors to participate in the potentially lucrative hospitality sector without the burdens of direct property management. By pooling capital, investors can gain access to larger and more complex hotel assets than they might be able to acquire individually. However, the world of hotels is diverse, and understanding the nuances of different hotel types is paramount for conducting effective due diligence in real estate and making informed investment decisions within the realm of hotel real estate syndication.

Not all hotels are created equal, and their operational models, target markets, revenue streams, and risk profiles can vary significantly. Before investing in a hotel real estate syndication, it's crucial to recognize these distinctions and align your investment strategy with the specific characteristics of the underlying asset. This comprehensive guide will explore the primary categories of hotels commonly found within hotel real estate syndication opportunities:

1. Limited-Service Hotels (Economy & Midscale):

These hotels, often recognized by brands focused on value and essential amenities, cater to budget-conscious travelers and those seeking short stays. Key characteristics include:

• Amenities: Typically offer basic amenities such as complimentary breakfast, Wi-Fi, and sometimes a small fitness center. They generally lack full-service restaurants, extensive meeting spaces, and concierge services.
• Target Market: Primarily leisure travelers on a budget, business travelers seeking cost-effective accommodations, and transient guests.
• Operational Model: Lower operating costs due to fewer services and staffing requirements. Revenue is primarily driven by room rentals.
• Syndication Appeal: Can be attractive for their relatively stable demand and lower development or acquisition costs compared to full-service hotels. Due diligence in real estate for these properties focuses on occupancy rates, efficient management, and maintaining a competitive price point within their market segment. Hotel real estate syndication in this category often emphasizes consistent cash flow.

2. Full-Service Hotels (Midscale & Upscale):

These hotels offer a wider range of amenities and services designed to cater to a broader market, including leisure and business travelers seeking more comfort and convenience. Key characteristics include:

• Amenities: Typically feature on-site restaurants, bars, meeting and event spaces, fitness centers, swimming pools, and often concierge services.
• Target Market: Leisure travelers, business travelers attending conferences or meetings, and groups.
• Operational Model: Higher operating costs due to the extensive services and staffing required. Revenue streams include room rentals, food and beverage sales, and event bookings.
• Syndication Appeal: Offer potential for higher revenue per available room (RevPAR) and greater overall revenue. Due diligence in real estate for full-service hotels involves a deeper analysis of food and beverage operations, meeting space utilization, and the effectiveness of sales and marketing efforts. Hotel real estate syndication in this segment may focus on maximizing revenue through strategic management and attracting group business.

3. Upscale and Luxury Hotels:

These properties represent the higher end of the market, emphasizing premium amenities, exceptional service, and often unique or iconic locations. Key characteristics include:

• Amenities: Feature fine dining restaurants, luxurious spas, state-of-the-art fitness facilities, extensive business centers, personalized concierge services, and meticulously appointed guest rooms and suites.
• Target Market: Affluent leisure travelers, high-end business travelers, and those seeking exclusive experiences.
• Operational Model: High operating costs due to the emphasis on exceptional service and top-tier amenities. Revenue is driven by premium room rates and high spending on ancillary services.
• Syndication Appeal: Offer the potential for significant revenue per available room (RevPAR) and strong appreciation in prime locations. Due diligence in real estate for luxury hotels requires a thorough understanding of brand reputation, service standards, and the ability to attract and retain a discerning clientele. Hotel real estate syndication in this segment often focuses on maintaining brand standards and delivering exceptional guest experiences.

4. Boutique and Lifestyle Hotels:

These hotels differentiate themselves through unique design concepts, personalized service, and a focus on creating a distinct guest experience that often reflects the local culture or a specific theme. Key characteristics include:

• Amenities: Vary widely depending on the concept but often include curated food and beverage options, stylish common areas, and unique in-room amenities. The emphasis is on creating a memorable and Instagrammable experience.
• Target Market: Travelers seeking unique and authentic experiences, often within a specific demographic or interest group.
• Operational Model: Can vary significantly depending on the level of service and amenities offered. Marketing and branding play a crucial role in attracting their target audience.
• Syndication Appeal: Offer the potential for high RevPAR and strong brand loyalty if the concept resonates with its target market. Due diligence in real estate for boutique and lifestyle hotels requires a deep understanding of the brand's appeal, the effectiveness of its marketing, and the ability to maintain a consistent and compelling guest experience. Hotel real estate syndication in this niche often hinges on the strength of the brand and its ability to capture a specific market segment.

5. Extended Stay Hotels:

Designed for guests staying for longer periods, these hotels offer apartment-style accommodations with amenities geared towards extended stays. Key characteristics include:

• Amenities: Typically feature in-room kitchens or kitchenettes, laundry facilities, and more spacious rooms or suites.
• Target Market: Business travelers on extended assignments, individuals relocating, and families needing temporary housing.
• Operational Model: Can have lower operating costs compared to traditional hotels due to less frequent housekeeping and fewer daily service demands. Occupancy rates tend to be more stable due to longer stays.
• Syndication Appeal: Offer the potential for consistent occupancy and predictable revenue streams. Due diligence in real estate for extended stay hotels focuses on the stability of the local economy and the demand for temporary housing. Hotel real estate syndication in this sector often emphasizes consistent cash flow and lower turnover.

Conducting Due Diligence Across Hotel Types:

Regardless of the specific hotel type, thorough due diligence in real estate is essential before investing in any hotel real estate syndication. This process should encompass:

• Market Analysis: Understanding the local demand drivers, competitive landscape, and potential for future growth.
• Sponsor Due Diligence: Evaluating the experience and track record of the syndicator and the proposed management team.
• Financial Due Diligence: Scrutinizing the pro forma projections, operating expenses, and revenue assumptions.
• Property Due Diligence: Assessing the physical condition of the hotel and any potential capital expenditure needs.
• Legal and Regulatory Due Diligence: Reviewing all legal documents and ensuring compliance with relevant regulations.

Unlock the Secrets to Successful Hotel Syndication Investing!

Understanding the different types of hotels is just the first step towards making informed investment decisions in hotel real estate syndication. To truly master the art of due diligence in real estate within this dynamic sector, you need in-depth knowledge and expert guidance.

That's why we invite you to register for our upcoming webinar: "Hotel Syndication Due Diligence Masterclass" on Tuesday, August 26th, 2025, at 5:30 PM CST!

Join industry experts Dr. Sam Giordano and Lance Pederson as they delve deep into the critical aspects of evaluating hotel real estate syndication opportunities. This masterclass will equip you with the knowledge and tools you need to confidently navigate the complexities of hotel investments, understand the nuances of different hotel types, and conduct thorough due diligence in real estate to identify promising deals and mitigate potential risks.

Don't miss this invaluable opportunity to gain a competitive edge in the world of hotel real estate syndication. Register now and take the next step towards building a successful and profitable investment portfolio!

By understanding the distinct characteristics of each hotel type and applying rigorous due diligence in real estate principles, investors can navigate the landscape of hotel real estate syndication with greater confidence and increase their chances of achieving their financial goals.