The pandemic had adversely impacted the hotel industry. So, much so that many hotel owners are thinking about how to put their properties to good use. And one of the best trends today is the conversion of unused and broken hotels into low-cost housing units for the workforce population.
The process of transforming distressed hotels into housing units
Today, many developers notice a scope in the suffering of the industry. Usually, such buyers are trying to leverage the crisis faced by the hotel industry by taking over the foreclosed and struggling properties at a bargain cost. They are also searching for ways to profit from the increasing demand for cheap houses from families that got compelled to downsize because of the recession. The hotel conversions signify the problem created in the hotel segment because of the pandemic. Several properties are incurring acute losses because of a decline in travel.
Several hotel-to-housing conversions develop low-cost housing. In almost 65% of the motels and the hotels that got shifted to the multifamily houses, the rent was exceedingly beneath the market rate or a blend of the market-rate and below-market-rate. Converting the hotels to homes seems best in the market where the cost of new buildings has gone up. Today, many hotel rooms are converted to studio apartments by providing a 20% discount on the rent.
Today, several developers are considering the market circumstances to resolve the low-cost housing issue, even though it’s not their business plan to develop low-cost housing. According to experts like Maxwell Drever, the entire millennial aspect of spending almost 40% and 50% of the earning on rent doesn’t make practical sense. On the other hand, extended stay hotels are the best option as they might be lesser than the average apartment, most of which has kitchenettes and bathrooms.
A profitable solution
The conversion of the vacant motels and hotels is ideal for addressing the underutilization of the motels and hotels. It also enables to remove the shortage of housing. That aside, the concept of adaptive re-use is not just economic. Still, it also proves to be environmentally friendly when compared to the new commercial developments as the adaptive re-use emissions are much lesser.
Additionally, the new commercial construction will cost you more than the re-use by almost two-thirds square foot. And while the motel and hotel to the multifamily conversion is not a new trend, because the occupancy and revenues acutely decreased because of the pandemic, the investors are using the property to remove the housing shortage while offering a few low-cost housing choices. Hence, while converting the hotels to the multifamily houses is becoming highly popular, it might not be the only use for any distressed property.
On that note, Maxwell Drever says that it totally depends on the hotel owner to decide whether they would think about transforming their property to a low-cost housing unit. And in the process, they might evaluate the property in different ways that will add ease to the conversion process.
