Over the last decade we have seen the rise of the sharing economy. And it is clear that companies like Uber, AirBnB and Lyft are here to stay. These new platforms have changed the way industries and economics work. A growing trend is that of real estate crowdfunding, and in the last few years hotel crowdfunding has also become more popular.
Peer to Peer Investment in the Hospitality Industry a Growing Trend
So what does it actually stand for ‘sharing economy’? Originally growing out of the open-source community to refer to peer-to-peer based sharing of access to goods and services. Shared Economy is also known as collaborative consumption or collaborative economy or peer economy. It refers to a hybrid market model of a peer-to-peer exchange. Such transactions are often facilitated via community-based online services. Uberization is also an alternative name for the phenomenon. (source Wikipedia)
In the case of crowdfunding it is about accessibility. Instead of being limited to institutional investors or capital equity funds, investment in business becomes accessible to all, creating a democratized marketplace.
Over the last few years we have seen more smaller private investors participating in real estate projects via peer to peer financing. And this has now also crossed over to the hospitality industry. Various initiatives have been launched over the last few years in terms of hotel crowdfunding. And more importantly, private investors have show appetite to participate in this market which was previously out of reach. There are different models being rolled out, from a silent investor merely reaping interest to options where investors could visit or even stay at the very place they funded.
New trends in the real estate market, including peer-to-peer sharing, micro-living, social responsibility and ecological sustainability could serve as a catalizer factor for more crowdfunding to happen for hotels and resorts. From an investor perspective it is of course very interesting as the hospitality industry can offer a high ROI (6% to 8%) compared to other investment options, and the risk is limited with real estate as an underlying security.
Vojo Ventures has been recently launched, and is a new type of hotel investment fund, also targeting private investors to finance hotel acquisition and development. They allow people to step in with contributions starting from €50.000. Not only are they innovative in terms of taking hotel crowdsourcing mainstream, but also with the type of projects they finance they are taking a different angle.
‘With our first fund we are concentrating on independent properties which are mostly ignored by the more institutional funds and investors. We are looking at smaller hotels, bed & breakfasts and hostels. It's not the type of property that defines our interest, but rather the potential of turnover and ROI. Together with our strategic partner Xotels, which holds over a decade of experience in hotel turnaround management, we normally see an uplift of 10% to 20% in the first years.’ says Patrick Landman, founder of Vojo Ventures.
Gijsbert van Doorn, partner at Vojo adds, ‘Besides offering a competitive base return to our investors, we also offer an incremental upside based on the yield results of the underlying operations. Streamlining costs and pushing up revenue streams creates for a very healthy mix to deliver a premium return for our partners.’
More info: www.vojo-ventures.com
Patrick Landman @ Vojo