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Hotel buy-to-let model is under threat as GuestInvest fails

09 October 2008 by

The collapse into administration of GuestInvest, the pioneer of the buy-to-let hotel model, is "bad news" for the future of the concept, according to experts, but other operators in the field have insisted it can still work.

GuestInvest, which went into administration last week, allows private individuals or companies to buy a hotel room, stay there for free for up to 52 nights a year and receive a rental income from its use during the rest of the time.

The London-based company, founded by Johnny Sandelson in 2003, was the first to utilise the buy-to-let model and has since been joined by property developer Galliard, with two Park Plaza hotels in London, Owner Hotels in Hull and York, the Skelwith Group at Flaxby Country Club near Harrogate and the Four Pillars at Cotswold Water Park.

Philip Camble, hospitality director at property agent Cushman and Wakefield, said the economic slowdown meant buy-to-let schemes were now facing the "acid test".

"When the market drops, occupancy drops and then investors' expectations aren't met. At that point we'll know what the appetite of investors is," he said. "It's bad news for the model - if it can't work in London, where can it work?"

But Paul Ellis, managing director of the Skelwith Group, insisted there was nothing inherently wrong with the buy-to-let model.

"Our room income accounts for only 40% of income, with the other 60% coming from the spa and gym, bars and restaurants, golf course, conference centre and shops," he said. "The GuestInvest model of selling the rooms and staying there yourself on a regular basis was just not sustainable."

David Galman, sales director at Galliard, which has a five-year rent guarantee, does not offer free hotel stays to investors and shares the profits rather than splitting the revenue, agreed.

"Some of our investors have achieved a 90% occupancy and a 20-25% increase in expected profitability," he said. "I still have 100% faith in the buy-to-let hotel market - it's not flawed and we're proving that it's not."

Buy-to-let firm GuestInvest goes into administration >>

Insatiable demand for London rooms >>

Buy-to-let market - room for more? >>

Skelwith Group plans £100m luxury hotel >>

By Gemma Sharkey

E-mail your comments to Gemma Sharkey here.

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