Real estate funds specialized in the Italian hotel industry: a case study analysis

Real estate industry is looking for new asset classes characterized by a different risk-return profile with respect to standard classes (offices, retail, residential, etc…) and the hotel industry represents a new asset class where the real estate funds are looking for new investment opportunities. The performance analysis of the hotel industry shows that the hospitality industry performs differently with respect to other real estate asset classes and there are significant differences on the basis of the location and the quality standard of the hotel structure.The performance in the hotel industry is significantly affected by the reputation of the hotel and its capability to maximize the RevPAR (through the optimization of the ADR and Occupancy rate) of the hospitality infrastructure. The performance drivers of this asset class are not comparable to other real estate types and skills and information necessary for evaluating investment opportunities in the hospitality industry are unique and not frequently available for fund managers operating in the other real ester sector.Literature on diversification strategy in the hotel industry is still limited and there are only few evidences outside US about the performance of hotel specialized real estate portfolios. The paper analyses the Italian industry and provide evidence on the performance achieved by the opportunities related to the hotel industry by considering the case study methodology. Results highlight that the performance of the hotel industry is different with respect to other real estate asset classes and the portfolio composition criteria normally adopted for specialized real estate funds are unique and focused prevalently on the revenues forecast and the rent sustainability.