JNR Capital is based out of Massachusetts and has 30+ years of experience in hotel acquisitions and development.
Let’s dive into the interview!
High Risk/High Reward
Lincoln: Why the hotel business? What do you like about it?
Jignesh: I grew up surrounded by friends and family who were mostly hotel owners.
It’s a high risk/high reward business: higher than multifamily or office because it’s active – the price of rooms fluctuates daily – it’s similar to airline pricing.
This means we can adjust more easily to the demands of the market than other real estate.
Lincoln: This industry is operational-heavy, meaning there’s a lot more involvement than other investments where you just allocate money and wait.
Do you outsource those operational responsibilities or are you more involved?
Jignesh: Hotels are a combination of high-quality real estate and operations.
Both aspects need to be done well.
JNR Management Inc. is our property manager, so they carry out construction, renovations, maintenance, etc.
They are also an approved operator for hotels like Hilton or Best Western, so it’s nice to have them under our umbrella.
Jignesh: Here’s how the hotels are valued:
We use the income expense approach to determine cash flow, perform sales comparisons (how our rooms compare with competitors’), and calculate replacement costs (what it would cost to replace the building).
The buyer tends to focus more on the income approach.
To conclude, if you have a bad operator, then the value of the hotel declines rapidly.
We like to buy hotels that are in distress or that aren’t operating to their full potential so that we can come in and capitalize on that opportunity.
Lincoln: Does JNR manage all employees of every hotel?
Jignesh: Each hotel has its own LLC, and all employees that work for that certain hotel all operate under that entity.
In a few cases, JNR Management Inc. manages all employees of the hotel
However, there is no right or wrong answer – it’s whatever works best for the given scenario.
That’s all we’re going to cover today on how to build a hotel empire!
Thanks for stopping by,
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