Investors of hotel properties are looking to purchase them and turn them into something else says Maxwell Drever. It isn’t new, as people do this with many hotels, transforming them into condominiums, student housing, and assisted living. However, there is usually a bigger demand and buzz around buying a hotel property. For example, in the U.S., the price tag on converting a regular hotel into an alternate type of building goes up by 25-35 percent versus what someone would typically pay for an average hotel. The reason behind such expectations is also the increasingly short supply of affordable workforce housing. Although the case of the missing middle class is not a new phenomenon, things have caught pace in this specific area after the pandemic.
Studies predict that around USD 25-30 billion can come from total sales of hotels that will get a makeover over the next five years. In this context,Maxwell Drever gives some critical insights on the mass adoption of hotels by developers for affordable workforce housing development.
Why do hotels make the best case for filling the workforce housing gap?
Converting hotels can be cost-effective for developers and the workforce population alike. It substantially brings down their construction cost and makes the project more viable whether you consider charges related to labor, materials, and others. Several market analysis reports indicate that turning specifically small hotels into affordable housing can bring an estimated USD 12-18 million in value. After all, developers get the entire major infrastructure in place to change a few main things here and there. One has to take permission from local bodies, but good vision. And budgeting ease this process, resulting in faster shipping and demand fulfillment.
Why do people favor the idea of converting hotels into affordable workforce units?
The recent viral outbreak called COVID-19 caused the death of millions of people worldwide. One industry that suffered the most due to the pandemic is the hospitality sector. Since many hotels, restaurants, and bars had to shut down to mitigate the ill effects of this virus. While closures caused them significant financial loss, the hope of complete revival for many of them still looks bleak. A lot of them have already quit the business. Such situations raised concerns about the best way to deal with the closure and ensuing abandonment of hotel buildings.
Maxwell Drever, one of the pioneers of the hotel’s adaptive use as affordable housing, explains that hotels generally serve as temporary housing. Therefore it can be easy to re-purpose them into permanent housing. Since they need a minimum amount of resources for adaptive reuse, they can easily develop into affordable units. And alleviate the housing crisis.In this context. Even a small boutique hotel can come in handy as they usually house about 80 to 120 rooms. The counties can look forward to such development to earn them occupancy taxes.
Essentially, the adaptable attributes of the hotels and the lower development costs. Make them one of the best alternatives to solve the rising affordable housing crisis. Since most of them occupy strategic locations in cities, the target audience can also reside in them.