The quality and type of real estate in any town can define its culture, particularly when it comes to tourism. In order for a destination to attract travelers, it needs a very diverse range of properties. When you think of tourism and real estate, you probably think of retail and hospitality assets, and although these are important, any tourist destination also needs the infrastructure to support these industries. This means a wide range of commercial properties as well as residential units.
Effectively planning for destination growth can be a very successful real estate strategy. In particular, mixed-use developments are ideal for attracting a steady stream of tourism and therefore consistent tenants for both business and residental properties. Although these developments can require quite a bit of capital to start, the financial reward can be high when managed effectively.
When investing in real estate in a tourist destination, it’s important to consider the location very carefully. An investment strategy that works well in one city may completely fail in another. Ultimately, you’ll want to make sure your investment is filling a need in the area, whether that is for single-unit residential rental properties, a large hotel, or a mixed-use development.
The first question to ask is if this destination support tourism throughout the year. Ideally, you’ll want to be consistently making money on your investments in both the summer and winter. For example, investing in a small ski town that doesn’t attract business during the summer could have you running at a loss, even if the area is booming during the winter.
Is the area already saturated? Investing in an area that already has a developed tourism infrastructure can be very expensive at the outset, and competition can make it difficult to get the returns you are looking for. However, if a town does not have any infrastructure in place for tourism, then you won’t attract the business you need to sustain your investments. The key is to find the right balance. Look for cities and towns that are already starting to attract more adventurous travelers, but haven’t seen a huge increase in prices yet.
Of course, real estate investing is about more than finding the right location – you’ll also need to find a property that can provide consistent rental returns. Many high-end developers have chosen to focus on mixed-use developments around tourist attractions like theme parks, beaches, casinos, and ski resorts. These developments have residential units for short or long-term stays, as well as commercial units, usually with a focus on retail or restaurants. Entertainment and nightlife venues are often incorporated as well. In order for these developments to work, the area needs to see a consistently high volume of tourism throughout the year.
Another strategy is to invest in smaller residential properties and then rent them out to tourists. This is a more feasible option for most independent real estate investors. Properties in tourist destinations often see an increase in property values over time. This means that if you buy at the right time, you can make very strong returns. However, it’s crucial to make sure that the property isn’t overvalued at the time of purchase.
Real estate and tourism are directly connected, so it’s an important factor to consider when buying a property anywhere. Real estate development can directly contribute to a city’s status as a tourism center, and conversely, investors can take advantage of an area’s status as a vacation destination to find valuable properties.
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