BUSINESSWIRE – The hospitality industry has been hard hit in the pandemic, as shutdowns and the lack of travel have prompted a surge in vacancies. But investors are swooping in to buy hotels and reimagine them as more than just short stays.
Instead, hotel conversions are becoming a bigger business as investors look to buy hotels and turn them into rental apartments. Investors are buying struggling or foreclosed properties at bargain prices and “looking to profit from rising demand for cheap housing from households forced to downsize during the recession.
Nearly 20% of hotels with securitized mortgages are delinquent on their loans, as of November, according to data from Trepp LLC. That is up from 1.52% a year ago.
“We consider ourselves a building recycling company,” Dan Norville, president of Vivo Living. Since the pandemic, Vivo Living has been working on three hotel conversion projects in Mesa, Ariz.; South Bend, Ind.; and Winston-Salem, N.C. It plans to buy a fourth hotel in San Antonio, Texas, early next year.
Extended-stay hotels are ideal for turning into apartments, Elan Gordon, principal of SHIR Capital, a real estate investment company. The firm has converted hotels into apartments throughout South Carolina and Texas. Extended-stay hotel units already have kitchenettes built into them, he notes.
But these types of conversions can take time, as they sometimes require zoning changes. Also, hotel rooms are usually not large enough to be qualified as a housing unit under most current zoning laws and must be adapted.