“ WE STRONGLY BELIEVE THE LIMITED-SERVICE SEGMENT WILL CONTINUE TO BE A STRONG INVEST AND HOLD STRATEGY FOR OWNERS IN BOTH THE SHORT AND LONG TERM . WITH AN EXPECTED ADR INCREASE OVER THE NEXT FEW YEARS , THIS SEGMENT ALLOWS OWNERS TO INVEST IN AN OPERATION THAT WILL HEDGE AGAINST INFLATION AND CONTINUE TO DELIVER POSITIVE RESULTS .
– BURTON BROOKS
acre and go as large as is required to deliver revenue-producing guest rooms and amenities . Modular construction and prefabricated building components are being tested with positive early results in certain markets .
Most limited-service brands work with the conversion of existing franchised or independent hotels , allowing owners to quickly improve their upside with the addition of a recognized brand ’ s reservation system . Some brands require a more substantial food and beverage offering , but most are limited to a complimentary breakfast . The “ grab and go ” concept will continue at properties post-pandemic and complement a limited buffet for guests that desire to have a seat .
With fewer rooms , limited-service properties require fewer employees than their full-service counterparts , which is a cost-savings and an advantage in this current labor market . Properties have been able to institute servicing the room at check out .
Limited-service properties only offer amenities required by most guests . In most cases , these are limited to a business center , fitness center , swimming pool and meeting room . Revenue is generated primarily from room sales and can be supplemented by the marketplace , parking , and early check-in fees .
Expenses at a limited-service hotel are much lower , as well . Reduced staffing means lower labor costs , which we have seen creep above 50 % of gross operating expenses for less of a headcount of employees . Food and beverage costs are lower but typically vary more , depending on menu items offered and whether a breakfast attendant services the area . These cost savings translate into an improved net operating income with a higher percentage of revenues than at a full-service hotel . Higher net operating income equals a better return on investment as both an ongoing business and in the disposition of the property at the
end of its economic cycle in your portfolio .
Finally , the best business case upside for a limited-service hotel is that its customer base is much larger than its full-service counterparts . Travelers across all income levels , essential workers , logistics providers , commercial and industrial employees all spend the night on the road at limitedservice properties across the country . With many different price points , and every brand having an offering , limited-service hotels attract rate-conscious vacationers and seniors . At the end of the day , limited-service properties allow the operator to focus on selling room nights and not have the operational risk that can be part of focusing on other amenities .
We strongly believe the limitedservice segment will continue to be a strong invest and hold strategy for owners in both the short and long term . With an expected ADR increase over the next few years , this segment allows owners to invest in an operation that will hedge against inflation and continue to deliver positive results .
With limited amounts of these properties on the market currently , owners in this segment will be able to list and sell their hotel reasonably quickly and at a premium due to it being a preferred investment class . Many investors are looking for a limited-service product in the market , and there is an inordinate amount of capital on the sidelines . All of these factors make limited-service properties the best investment in the hospitality industry .
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