How to own hotels

Fancy taking a stake in the hotel business? It may not involve the millions you thought.

When a company needs extra financing, the traditional route is to seek private equity investment or raise funds by selling shares in the company publicly on the stock market.

But when Synapse Development Group set out to fund its latest hotel project - a new branch of the tech-forward Yotel brand located in the heart of San Francisco - the company decided to do something it had never done before: put the project up on a crowdfunding website.

Offering a projected annual return of 18-20 per cent on investors' money had its appeal. "Hotels are often higher yielding than most other asset classes in real estate, so from an investment perspective, that's a major attraction, especially for hotels in prime markets," Synapse CEO Justin Palmer explained. Investors were also enticed with a few cherries on top, including discounted rates on overnight stays at Yotel, limited edition artwork, and, depending on the investment level, invites to annual investor parties, exclusive rooftop galas and a cocktail crafted and named in their honour.

Palmer described his first stab at crowdfunding as "very successful." The project at 1095 Market Street was listed on the platform RealCrowd and had more than 40 investors from London to Hong Kong. Donations averaged just more than US$50,000 (S$69,900), with contributors mostly split across the US$25,000 and US$100,000 investment tiers.

The beauty of crowdfunding is that it allows both companies and individuals to raise large amounts of money through small contributions from individual investors through an online campaign.

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