Top Ten Resort Investment Opportunities: How to Choose Which Unit Style Works Best for You
August 31, 2020
Most successful resorts offer a variety of unit types and accommodations, making it easier to adapt to new trends, and cater to a wider guest pool and shifting markets.
To help you better understand your investment opportunities, here is a breakdown of the different unit types, along with rental arrangements, that you’ll find at many resorts.
1. Joining a Rental Pool
Because owning vacation property comes with a myriad of responsibilities and expenses, many investors opt to join a rental pool that is managed by the resort, which helps take pressure off the financial, booking, management, and maintenance duties that come with purchasing the unit.
When an investor chooses to join a rental pool, they split profits with the resort. The resort then looks after the property when the investor is away and capitalizes on their brand to attract renters, generating income for themselves and the investor.
The income generated from rentals can often cover the investor’s utility costs, property taxes, insurance, and general maintenance expenses. But before you commit, research how the hotel or resort performs and if the location and resort amenities attract a considerable number of vacationers year after year.
2. Whole & Fractional Units
If you’re not great at sharing with others, whole unit ownership can be a good fit. Whole unit ownership allows you more control regarding when you rent out the space, as well as more autonomy when it comes to decisions surrounding decor, landscaping, and added amenities. Keep in mind, however, the costs of whole ownership, including maintenance, booking, housekeeping, insurance, and taxes, all land entirely on your shoulders (generally).
Fractional unit ownership allows you to own a slice of a vacation property. Unlike whole unit ownership, you’ll typically share the unit with three to eleven other investors and have access to the property thirteen or more weeks per year.
Each investor holds an equal part of the title and divvies up homeownership costs and maintenance responsibilities, making fractional unit ownership more affordable and less hassle.
Timeshares often feel like a home away from home with incredible amenities and luxuries that exceed your typical hotel accommodations. When you invest in a timeshare, you’ll be able to use the property during an allotted one to two weeks out of the year.
And while you don’t own the property (the resort property owner holds the title) you can rent out one or two of your assigned weeks to earn income or cover your timeshare expenses, such as maintenance.
4. Lockout Units
Lockout units provide more versatility than other unit styles you’ll find at resorts. A lockout unit generally includes two bedrooms or more, which can be divided into two separate independent sections, with a locked door in between.
With the ability to separate the unit, your renting options expand. You can rent out the unit as a whole, rent out one half and stay in the other, or rent out both sections to separate vacationers to increase your earnings.
5. Lodge Units
If you want to be right next to the action, lodge units can be an excellent choice. Because you’re located within the main building, you can be first in line for the buffet, snag the best seat by the fire, and won’t have to trek far for assistance from lodge staff. You’ll have easy access to the lodge’s amenities, but bear in mind you’ll likely have to contend with more noise.
Lodge units tend to be smaller, making them more affordable than the luxury villas or grand cabins detached from the lodge. But, if you have a large family or like to invite numerous guests, a smaller lodge unit could get tight.
6. Townhomes & Condos
Townhomes and condos can be a great investment, specifically if you’re looking to invest in high-density tourist spots where space is at a premium. A relatively recent trend is the condotel, a condo-hotel hybrid allowing investors to purchase and rent out condos in a hotel. One of the major benefits of investing in a condotel or resort condo or townhome is you’ll be able to utilize the resort’s amenities and services.
Keep in mind you’ll still have to contend with a homeowner’s association (HOA) and be responsible for taxes, interior repairs (with townhomes you may have to cover some exterior repairs as well), insurance, and HOA fees.
Perfect for secluded getaways, investing in vacation cabin rentals is particularly timely with the ongoing pandemic — enjoy the built-in social distancing!
While rental agreements will vary by resort, typically you’ll be able to enjoy full resort amenities plus management services such as maintenance, housekeeping, security, rental bookings, and repairs. Be prepared to cover those costs, though, along with taxes, insurance, association fees, utilities, communications, and a few other minor expenses.
8. Tiny Homes & Yurts
If you’re not familiar with the tiny home trend, tiny homes are typically built on wheels for easy travel, range anywhere from 60 to 400 square feet, (rarely eclipsing 500 square feet), and are full of character. Tiny home hotels and resorts are becoming more popular, offering guests access to beautiful remote locations while still enjoying amenities like television, internet, and a full kitchen.
Similarly, yurts are trending as a great way to escape from the cities without forfeiting creature comforts. These portable, round insulated tents can fit plenty of accommodations and amenities, including queen-size beds and wood-burning stoves.
For the investor, upkeep for both tiny homes and yurts is relatively low-maintenance. And with guests anticipating a more rustic, wilderness getaway, amenities like a pool or daily housekeeping may be optional. Plus, because yurts are considered temporary structures, they’re generally less regulated than brick-and-mortar buildings.
9. RV Units
With little infrastructure and minimal facilities to maintain, RV resorts tend to produce a higher ROI than other hospitality properties. Much like a timeshare, investors can own a lot for a designated time and rent out the space to other campers and RV owners.
Or, you can join a rental pool and rent out your RV to other vacationers, splitting earnings with the RV resort company.
10. Camping & Glamping
While both campers and glampers want to immerse themselves in nature, glampers won’t be heading to bed with a rolled up sleeping bag. Rather, glampers will be sleeping soundly between soft sheets on a comfortable mattress.
Glamping, or glamorous camping, provides campers with luxurious amenities such as large beds, private bathrooms, and daily cleaning services, all set against a scenic backdrop.
According to market research firm Arizton, glamping in the U.S. is projected to reach $1 billion in revenue by 2024.
Luxury tents cost less than traditional resort units and investors see high returns, typically generating a 20% to 40% rate premium over traditional accommodations.
But, whether you’re investing in camping or glamping, be sure to seek out desirable locations and offer plenty of immersive experiences such as hiking trips, yoga sessions, or even spa treatments.