Three Revenue Models for Real Estate Investment: Which One to Choose?
Investing in Real Estate is becoming an increasingly popular prospect for those who are seeking a stable source of income and long-term profitability. But how do you select the model that offers the greatest benefit?
Let's explore three of the most common revenue models, their pros and cons, and share why we chose a specific model for the 5-star Pontus Rotana Resort & Spa - Gonio project.
1. Rental Income
This is the most straightforward model: you purchase a specific hotel room and earn income from renting it out. While this approach can be profitable, it comes with certain highlights:
Revenue Factors: Occupancy depends on various factors, such as location, view, average daily rate. If the room isn’t rented out and you don’t earn income you are still responsible for maintenance costs (utilities, repairs).
Risks: Unpredictable income, especially during the low season.
Management: It often requires active owner involvement, such as securing tenants or hiring a management company for an additional fee.
Conclusion: This model is for investors willing to invest time and effort in property management. However, it’s not always ideal for passive income seekers.
2. Guaranteed Income
In this model, the developer or management company guarantees a fixed income for a set period, such as 3–5 years.
Pros: Investors receive stable income without the need to manage the property. Ideal opportunity for those who want to minimize risks and avoid active involvement.
Cons: Returns are often below market rates, rarely exceeding 5-6% annually. Additionally, the price of such units is generally higher.
conclusion: This model is for those who prioritize stability over high returns and seeking to secure a minimum guaranteed yield.
3. Shared Revenue Income
This model collects revenue from all rooms into a fund, which is then distributed proportionally among investors.
How it works: Instead of owning a specific room, you become an investor of the entire room stock. Revenue from all rooms is collected and distributed proportionally based on each investor’s share.
Advantages: You don’t need to worry about the occupancy of a specific room, as income is generated from the entire pool.
Cons: You will have a possibility to rely on experienced management company.
This model is for investors seeking a risk-diversified, hands-off approach to income generation.
Why We Chose the Revenue Pooling System for Pontus Rotana Resort & Spa?
After analyzing all models, we found out that the pooling system is the most profitable and convenient for our 5-star hotel as for our potential partners, that will be fully managed by Rotana. Here's why:
Higher ROI: According to Cushman & Wakefield and our feasibility study, the minimal return on investment (ROI) for the end of 2024 is 12.3%.
Passive Income: Investors don’t have to worry about selecting rooms or managing properties, Rotana - a leading hospitality brand, handles all operational side.
Transparency: All revenue is distributed fairly and transparently, making this model easy to understand and highly efficient.
Conclusion
The choice of a revenue model for hotel room investment depends on your goals and level of involvement:
If you want to manage your property, choose the first option.
If you prefer stability and don’t worry about lower returns, choose the second option.
But if you wish to maximize your capital gain while minimizing risks, the Shared Revenue Income structure is the best choice.
Pontus Rotana Resort & Spa combines transparency, high returns, and convenience for investors. We’ve created the fare conditions for you to enjoy stable income with minimal risks.