How to invest in hotels — four ways in, and what each one actually nets
There are four routes into hotel ownership — buy one directly, buy one with a brand attached, buy a hotel REIT, or invest through a syndication — and the further you sit from the front desk, the more of the gross return becomes someone else's fee. None of the four is the wrong answer by default; choosing by brochure instead of by computed net return is the mistake.
Direct ownership (with or without a franchise flag) keeps the most of the return but carries the operating load and concentration risk of a single asset. A publicly traded hotel REIT is fully liquid and professionally managed, at the cost of stock-market volatility and a management layer between you and the property. A syndication sits between the two: real property exposure without operating duties, priced through a sponsor's fee stack and promote.
On a worked syndicated deal, the limited partner's net return works out to a 12.23% IRR and a 1.7358x multiple — after roughly 3.77 percentage points of annual drag from fees and promote relative to the deal's own unlevered performance. That drag is not a criticism of syndication as a structure; it is the arithmetic every LP is entitled to see before committing capital, and most offering documents do not print it as one number.
The REIT route's comparison is different in kind, not just degree: on the same underlying economics, a REIT-style look-through distributes $4,664.77 per unit of comparable exposure against $5,126.37 of direct, unlevered distributable cash — the gap being professional management, diversification, and daily liquidity, priced into the return rather than charged as a visible fee.