If you’re reading this, I’m taking an educated guess that you looking to make an investment that is going to deliver in yearly returns. I know this, because you’re not alone. According to a survey conducted by the Adjara Ministry of Finance and Economy in 2019, 66% of all investors buy real estate in Batumi for its future cash flow potential, rather than for personal accommodation.
Now, the traditional way of making such an investment in Batumi would have you buying an apartment in one of the up and coming sky rises, and then inevitably having to find a third-party agency that would manage it for you to produce rental income.
Since you’re visiting our website, I’ll take another guess that you’ve probably also poked around to get to know our competition. I say “competition” very mindfully, knowing that our product is entirely different from what is currently available in the market.
Even though hotel room investment is a proven strategy of generating high stable returns worldwide, it is a rather new concept for Georgia and the region. So, today, let me give you 5 reasons why you should buy a hotel room in Batumi:
1. LESS COMPETITION.
According to research done in 2019 by TBC, one of the two leading banks in Georgia, 80% of the construction in Batumi falls under residential, versus 15% that is occupied by hotels. From 2014 to 2019 over 35,000 apartments have been added to Batumi’s market supply, and additional 1,235,000 square meters in 130 residential projects are expected to be delivered in 2019-2021.
Even with the rise of Airbnb on the market, data shows that international travelers are more likely to book a hotel (48%) than an apartment (34%). And the share of hotels among overnight stays is only growing.
Now, Batumi might have been one of Airbnb’s trending destinations in 2019 but AirDNA shows a yearly average of only 27% occupancy (with a high of 48% in August, and a low of 7% in October), and that is among 4,878 listings that got any bookings at all.
Of course, there are other methods of renting apartments other than Airbnb. With a few exceptions, the city’s rental market is generally unregulated, and largely untaxed. This creates opportunities for generating income, but no strict obligations to report it. Since hotels don’t enjoy these lax conditions, you can expect to be more secure and confident in yearly rental income reports provided to you after you invest in a hotel room.
TBC Capital’s latest research shows that upscale, and upper upscale hotels boast the highest occupancy rates at 66%. Among these, the chief majority is branded hotels. Local apartment developers capitalize on these brand names by putting trademarked hotels in their buildings. Names like “Marriott” or “Wyndham” on the side of the building fetch a hefty price per meter, and serve as a good selling point, by luring the investors with a faux sense of security. But the reality of things is this: if you buy an apartment with the intention of making rental income in a building with a branded hotel in it, you are setting yourself up to be at a disadvantage. A thorough examination of your purchase/management agreement will reveal that the brand is not actually responsible for the management of your apartment. In fact, you’ll find that you’ve put yourself in direct competition with the brand, without having access to the hotel’s facilities, or its considerable tools for marketing. Which brings us to reason number 2.
2. MORE MARKETING CHANNELS AND HIGHER OCCUPANCY.
Unlike individual apartments, hotels have more reliable and extensive means of booking their rooms, least significant of which are a greater variety of third party booking websites. With facilities that make all-inclusive offers possible, hotels can rely on co-operation with tour agencies to book individual rooms, but more importantly – group tours. The latter contribute greatly to hotel’s overall occupancy, as well as provide payments up-front.
Since the beginning of the city’s revitalization in 2012, the local government has been focusing in no small part on gambling to bring visitors to the region year-round. And while due to government incentives, most casinos are located within hotels, they only have a very limited number of rooms allocated for their particular use. So the casino administration often has to look elsewhere for accommodation for their high rollers. Such arrangements usually mean the casinos reserve top quality rooms for months at a time, so they can comfortably house their biggest spenders.
For this specific reason, Black Sea Blue – currently the most high-end Boutique hotel in our portfolio – is strategically located within a walking distance of five upcoming casinos.
Now, you might be thinking that all of this makes sense, but do we have the experience under our belt to deliver such results?
Since our foundation in 2012, the demand on Ruebush Hospitality Group properties and services has been growing fast. Like many in the region, we started our business helping investors purchase, renovate, and manage vacation rental real estate.
While we soon changed investment strategies to focus on much more stable and profitable hotel development, we remain committed to taking care of the investments made by some of our first clients.
A quick Airbnb search will return at least ten of our properties among the top 20 results at any time. In 2019, we operated 70% of the most profitable properties in Batumi. From June 2019, to June 2020, our average occupancy has been 84%, and we have received over 1,200 5-star reviews on Airbnb.
We have a handpicked list of reliable agencies we have been partnering with over the years. Our selected properties with incredible bird eye views of Batumi seaside have become a noteworthy feature of many vacations during this time. Presently, we receive our bookings through three major channels: Airbnb, reservations through agencies, and bookings through BookingBatumi.com.
BookingBatumi.com is a full-fledged direct booking website exclusively showcasing our own properties. Guests can make a reservation with an online pre-payment without any third party commission fees. And while it is not even a year-old, it currently brings in about 30% of our total bookings. We like to think of it as a first step in accomplishing our company’s ambition to change the Batumi hospitality landscape altogether.
3. HIGHER YIELD PER NIGHT.
Over the past three years, the growing supply of rental apartments has resulted in a slow, but steady decrease in rental yields reports TBC Capital research. According to hospitality market research done by PMCG in 2019, Batumi apartments or aparthotels rent for an average of 50-100 Georgian Lari a night, whereas a hotel room in Batumi will cost you anywhere between 137-384 GEL a night.
Our own data provides the same evidence. From an average nightly rate of $76.90 in August 2018, we have seen a stark and steady decline, to an average of $55.90 in August 2019, and $45 for August 2020. Even with our high level of occupancy and above average prices, the profit margin our rental apartments operate on is significantly lower that we project for our hotels. This is partially to do with the fact that in terms of management, hotels require much less operational costs to run efficiently.
If you get to know our projects in more detail, you’ll soon notice that we focus exclusively on boutique and lifestyle hotels, most of them in the upscale or ultra-Luxury category. Moreover, different as they are, our projects have all been created with the big picture in mind. Their facilities support each other, and create a network of lodging, dining, culture and entertainment that can keep visitors engaged and entertained for a longer stay. Our boutique properties vary in style to cater to specific demographics, and all of them are contained to a small number of rooms to ensure the highest possible yields for our hotel room investors. With our current projects we are set to create a new touristic ecosystem, for visitors who are looking for a more sophisticated and personalized experience boutique style hotels have to offer. Our hotels, therefore, are each positioned to cater to the top 1% of the price segment they are intended for.
4. HASSLE-FREE AND COST-EFFICIENT MANAGEMENT.
Buying a hotel room is one of the most hands-off investments you can make. As we mentioned in the previous section, hotels require a significantly smaller operational budget per unit for effective management.
For example, we currently have a hospitality staff of 6 housekeeping and guest services professionals, dedicated to servicing 20 vacation rental properties under our management. The same staff is sufficient to run double the number of hotel rooms in the same building, while also bringing down logistical costs significantly. This, of course, directly boosts your profit as an investor, and increases your yearly return on investment.
Being an owner of a hotel room provides you with transparent reporting, and since your profit is not dependent on the occupancy of your particular room – a stable income. With cameras and staff on site 24/7, you can also be absolutely sure that your investment is well-cared for at all times.
5. HIGHER GROWTH POTENTIAL.
Hotels are a lucrative subset of commercial real estate. Building one is associated not only with a sizable investment, but also significant manpower and know-how. By making hotel rooms available for purchase, we are making hotel investments accessible to anyone.
Commercial real estate always runs at a premium price, and is much less susceptible to the volatility of the real estate market. This is especially true for smaller, more exotic boutique type properties. In addition to their strategic, premium location, each of these hotels embodies a distinctive style and character which makes them an undeniable part of both the hospitality and entertainment landscape of the city.
BONUS: You get a Free Holiday!
In addition to all the business advantages we’ve outlined above, owning a hotel room also comes with one undeniable personal advantage - free holidays! You can enjoy the beautiful Black Sea beaches and explore the wonderful nature of subtropical Adjara with your family or friends for free, as part of your investment. The city’s seaside location, stunning nature, the eclectic mix of old and contemporary architecture as well as buzzing nightlife scene rightfully make Batumi stand out as one of the most interesting and vibrant holiday spots in the Caucasus region. By investing in a hotel room, you won’t just be making money, but also saving some.