Invest Internationally or Limit Your Potential

Invest Internationally or Limit Your PotentialIn a recent post I discussed how a home-country bias can limit an investor’s returns. But if you weren’t convinced by my argument, today I will give you the 2 main reasons why you actually need to invest internationally to reach your financial potential.

No one is perhaps guiltier of restricting their investment potential than Americans who remain locked in to the belief that theirs is the most successful nation on the planet, therefore the only place to invest.

If you look at the figures it’s easy to understand why this belief comes about. America is only home to 4.5% of the world’s population living on just 6.6% of the globe’s land, and yet America produces 22.5% of the world’s total gross domestic product.

Phew! What a successful nation. There’s no denying that.

However, an American who has a home-country bias, locked in to the belief that theirs is the most successful nation on the planet will fail to have realised that three quarters of the world’s economic activity is happening somewhere other than America.

And for the rest of us who live in far less successful countries, most of the world’s economic activity is happening beyond our restrictive borders.

The two main reasons why we all need to take an international view of our path to investment success are these: –

Growth Potential

The fastest growing economies in the world are in emerging nations across the planet – to cash in on that growth you have to take your investment to where it’s happening.

Emerging countries with rapidly advancing economies have a burgeoning middle class, building wealth and hungry to consume and acquire.

Find such a nation, invest accordingly, ride the wave of advancement…enjoy the best growth potential possible.

Diversification

International economic and market conditions ebb and flow – by diversifying your investment approach geographically you may be able to reduce portfolio volatility.

At the same time, you may be able to improve your risk-adjusted returns.

Warning

I truly understand why most people adopt a home-country bias. It’s better the devil you know! And when anyone looks internationally they come up against hurdles, risks and barriers – from complex tax issues to concerns about regulation risk.

That’s why it’s imperative to issue a warning – if you are considering any investment path seek appropriate qualified advice to guide you. This article does not constitute advice.

Global Hospitality Industry Uptrend

The global hospitality industry has been traditionally dominated by a few gateway destinations desirable for global travel such as New York, Paris and London. However now it looks like travellers have started to discover new destinations which has brought up numerous opportunities in secondary markets, reflecting a broader search for higher-yield investments.

Year 2014 was a relatively successful year for the global hospitality industry. With growing investors’ interest, demand ticking upward and accelerating capital markets the industry’s outlook was quite positive indeed: total earnings exceeded US$54.5 billion compared to US$52 billion in 2013.

The trend is expected to continue.

“In 2015, we expect widespread growth for the global hospitality industry”, says EY’s report “Global hospitality insights: Top thoughts for 2015”. New hotels will open in 2015, and approximately 1.3 million guestrooms will be added to the hospitality industry.

“The global hospitality industry entered 2014 on an upward growth trajectory; a greater sense of optimism was palpable across most regions, as accelerating capital markets, favorable supply and demand balances, and strong investor appetites fueled higher transaction volumes and strengthened lodging fundamentals.”

EY’s experts don’t doubt that the growth will continue in 2015.

They name the major factors that contribute to the positive trend in the global hospitality industry:

  • Lenders easing restrictions on construction loan originations
  • Growing cross-border capital flows boost up competition for hotel assets
  • Investment opportunities outside of gateway cities that can bring higher returns
  • Growing diversity of client preference encourages an influx of new hotel brands

The US economic recovery is aiding a rise in business and leisure travel followed by improving hotel performance. Foreign investment into the US hotel and hospitality sector increased approximately 137% from 2013 to 2014 with overseas buyers expressing more interest in secondary markets such as Phoenix, Atlanta, Houston and Orlando. Overseas investments in US hotels are coming mainly from Canada, China, Malaysia, Japan, Singapore and the Middle East.

Europe has also been a favourite among investors with London being in the lead as the pre-eminent European hospitality center. According to PwC report London’s hotels are set for a record in 2015 with occupancy rates expected to reach a 20-year high exceeding 84 per cent this year.

Dublin and Madrid are also expected to have a good profit increase by eight per cent and five per cent respectively, putting the two cities at the top of the league for revenue growth.

Hospitality investment in Germany in 2014 increased 100%  as compared the previous year totalling up to US$1.9 billion. Germany is said to attract investors with its low interest rates and high levels of debt liquidity. The EY’s report also underlines investors’ growing interest in secondary markets such as Frankfurt and Dusseldorf for higher-yielding opportunities.

PwC’s UK hotels leader Sam Ward predicts a healthy growth in European hospitality sector.

“The future for hotel deals across Europe is bright, as equity rich investors look to invest in the sector and benefit from stronger returns as trading conditions are set to improve. “

Asia-Pacific region has experienced overall decrease in investment volumes due to political unrest in Hong Kong and Thailand and economic uncertainty about the stability of China. Nevertheless Indian and Australian hospitality markets have been growing quite steadily.

Asian investors are particularly active in the Australian hospitality market attracted by  Australia’s strong fundamentals, maturity and transparency. As a result Australian hospitality sector has seen significant hotel development spend with new construction projects either being implemented or pending for planning permission.

EY’s Oceania Hospitality and Leisure Leader David Shewring said there was a significant opportunity in Australia for tourism asset owners and operators to continue to tap into global growth across the leisure, corporate and group travel segments.

He was also positive in his comments on the global prospects for the industry saying that despite some significant headwinds – such as geopolitical instability, new health concerns and inconsistent economic growth – the global industry is thriving and optimism prevails.

 

FDI and Social Progress Don’t go Hand in Hand

FDI and Social Progress Don’t go Hand in HandA nation’s approach to attracting and utilising foreign direct investment doesn’t necessarily have anything to do with creating positive social progress, meaning that even considerable investment can have little or no impact on the average person’s life.

That’s the concerning findings of a special report by Deloitte, in conjunction with the Social Progress Imperative (SPI), entitled ‘Foreign Direct Investment and Inclusive Growth: The impacts on social progress.’

The report compared data from the Social Progress Index, which is a measurement of growth and performance beyond gross domestic product, and FDI metrics for 132 countries.

Whilst the report discovered that the right policies can create a virtuous circle where rising social progress in a country attracts greater foreign direct investment interest and commitment, which in turn can then be used to drive further progress, it also discovered that this ideal is not always the reality.

Rather, in many nations there are not only barriers preventing FDI, but barriers to utilising the potential for FDI to have a positive influence on social progress.

For example, rapid economic growth can exceed the pace of social progress naturally. Alternatively, investment can be disproportionately directed to certain industries or sectors which have no real relationship with a nation’s people.

Other barriers to encouraging positive FDI inflows and their benefit towards social development include issues within the political or business environment, or the fact that some nations are seemingly caught up in a poverty trap.

Rashid Bashir, head of Strategy Consulting at Deloitte Middle East, said: “This report demonstrates how the Social Progress Index can act as a guide for business and other organizations to make smarter strategic investments and shows governments that policies focused on driving social progress can attract FDI, which in turn advances both economic and social development.”

Perhaps the key to ensuring that a nation’s social progress is positively advanced by foreign direct investment lies in something far simpler however. I.e., in simply understanding that there can be a positive relationship between the two.

In understanding this as fact only then can a government seek to leverage FDI positively for social progress by ensuring everything is in place to attract and utilise careful investment.

Jaguar Land Rover Seeks to Expand Overseas

Jaguar Land RoverTata Motors, India’s largest automotive player and the world’s fourth largest truck and bus manufacturer, is looking for a site to build a new production facility for its Jaguar Land Rover (JLR) brand.

Like almost any other car manufacturer, Tata is going through difficult times.  Last year JLR reported global sales growth of 9 percent compared to 2013, with 462,678 vehicles sold in 2014, yet between September and December 2014, JLR’s profit after tax fell by 4 per cent to Rs5,605 crore ($903 million) against Rs5,851 crore ($942 million) during the same quarter in 2013.

The company is taking active steps to turn around the situation, seeking ways to increase competitiveness and brand awareness. They are also exploring new possible markets such as the 10-member Association of Southeast Asian Nations (ASEAN) region, including Indonesia, Vietnam and Malaysia.

Despite a dip in profit the demand for JLR vehicles is not going down. The company is close to exhausting the production capacity at its factories in Britain and is said to be looking abroad for further expansion.

It seems though that JLR’s intention to shift its investments overseas has to do with their recent pay dispute with the union. Although the dispute is settled now, the aftertaste for Tata is bitter.

Lord Bhattacharyya who had played a significant role in brokering the takeover of Jaguar Land Rover by Tata Motors voiced his concerns that JLR might plan their further investments outside of the country. He also accused the union of behaving like in the “bad old days”.

“the unions should not be airing their grievances in public…and they should also understand that, though it does not believe in short-termism, if it finds that JLR’s cost base has become too high here then it will have no hesitation in putting future investment abroad.”

JLR and the union reached the agreement, but the Midlands’ most successful manufacturer, which has created thousands of jobs in Solihull and Castle Bromwich in recent years, is looking elsewhere to increase their capacity.

Georgia and South Carolina in the USA are being considered as possible places to set up a new factory.

The US market is very important for JLR making up 17 percent of the company’s total sales. The proposed US plant in Georgia is said to have a capacity of 100,000 units a year, while the plant in South Carolina is targeted for producing 200,000 vehicles a year. JLR’s present capacity in the UK is 450,000-500,000.

The company is also expressing interest in Turkey and Austria where the factory developments will cost much less than in the US.

JLR is determined to continue expanding the manufacturing operation. They have launched a factory in China that produces 130,000 units a year, their new plant in Brazil will add 24,000 units a year, and now they are looking for new opportunities to grow further.

Is Now a Great Time to Buy Agricultural Land in Brazil?

Is Now a Great Time to Buy Agricultural Land in Brazil?Since 2008 Brazil’s real estate economy has been on an unmatched positive trajectory. In fact, its property market was one of the most successful in the world through to 2014…

One can argue that it was starting from a very low base, but whilst that’s true, excellent fundamentals supported the sector’s ongoing and long-term appeal: –

  • A growing middle class, increasingly affluent, looking to protect against inflation through real estate purchases…
  • A growing tourism market with significant room for expansion…
  • A huge national house building program to meet unrivalled and growing demand…

However, everything has suddenly changed.

The speculators who were pushing the market have abandoned it, and developers are suddenly keen to sell off less profitable stock.

Short-term investors are looking elsewhere, and the massive construction boom of the last few years is finally delivering stock, snuffing out the negative demand/supply dynamic.

Vendors are slashing costs, deals are being made, and the property bubble is definitely deflating.

If that weren’t bad enough for the sector, a third consecutive year of catastrophic droughts is crushing the agriculture industry – and Brazil’s global reputation as “the world’s bread basket” is at threat.

Brazilian land prices are stagnant and the farming industry fears crisis.

This negative picture of land and real estate in Brazil is really worrying – framed as it is by a country in recession.

What’s more, economists agree that Brazil is facing a poor economic outlook for the next couple of years, and that to kick-start growth requires wide-ranging structural reforms for which there is little appetite.

So, would anyone but a madman consider buying Brazilian land?

A special report by CNBC last year dubbed farmland and the agriculture sector the best long-term real estate investment approaches possible.

Whilst the report wasn’t exclusively focused on Brazil it pays to remember that agriculture in Brazil is one of the principal bases of its economy.

Brazil now ranks among the world’s five largest agricultural producers and exporters.

Brazil can’t afford for that to change.

Of course the Brazilian government needs to acknowledge that it has a water crisis on its hands and act (note: the crisis isn’t just because of a shortage of water, it’s because of a critical lack of investment in water damming and supply infrastructure as well).

But until it does act it certainly puts any investor in a strong bargaining position when negotiating on a land purchase.

Individual foreign buyers are free to hold clear title to real estate in Brazil – if an investor is looking at rural or farmland however there’s a requirement to take up residency in Brazil within 3 years of acquisition.

A way round this is purchasing through a company.

Investors looking for a buyer’s market in a still emerging country currently stymied in the short-term by various issues could do very well from a strategic and carefully negotiated land deal in Brazil.

Culture of Risk Aversion Halts European SMEs

Europe BusinessIn February AFME (Association for Financial Markets in Europe) in cooperation with The Boston Consulting Group released a report “Bridging the growth gap: Investor views on European and US capital markets and how they drive investment and economic growth”.

The report reflects the opinions of some biggest global investors (representing €9tn of assets under management) including leading European and US asset managers, insurers, hedge funds, pension funds, private equity funds, fund management associations, and exchanges.

The report compares the European and US economies aiming to point out some successful US capital markets strategies that Europe can implement to promote investment and growth.

More than 20 years during the similar investigation, the institutional investors said that differences between national regulations and tax rates were still holding back growth. Not much has changed since. The report shows that taxes, solvency, lack of information and general macro outlook are still the biggest barriers for investors to put money in Europe.

Among other issues, the report discusses how finance and funds are made available for European small and medium-sized enterprises (SMEs).

SMEs are a very important component of European economy. The provide almost 67% of Europe’s employment and represent 58% of Europe’s value added.

Yet unlike the US’s rapidly developing SME sector, European SMEs haven’t been growing much at all for the past few years. In Germany for example, investment in innovative products at small and medium-sized firms has dropped for the third year in a row, according to KfW bank. It is blamed on continuing economic standstill and funding, with KfW calling on the government to “keep the ball rolling” when it comes to facilitating access to finance.

However, the report shows that more money is available to European SMEs than to US SMEs, with the greatest part of finance coming from the banks. Even considering the recent decline in bank lending in some countries across the EU European SMEs bank financing is still bigger than that in the US.

A study conducted in one of the EU countries revealed that 71% of businesses in that country approach only one provider when seeking finance, mostly their main bank.

Yet for small companies with limited profits or cash flows, bank loans are often not the most suitable form of financing.

Equity may be more suitable in many situations. However it looks like European SMEs prefer bank lending over personal or any other alternative sources of financing.

Interviewees thought that a European culture of risk aversion among SMEs and investors might explain the reliance on bank lending.

Hence alternative sources of finance such as venture capital and angel investing are greatly underdeveloped in Europe .

The report draws attention to the necessity of informing SMEs about differences between debt and equity finance and their suitability. There is also an issue of requirements which European SMEs should meet to be financed.

Cost and size requirements for SMEs to issue debt/equity are often too high for many small firms, and current market conditions do not make the securitisation of SME loans particularly attractive.

The conclusion is that Europe should wean SMEs off bank loan dependency, and increase supply and demand for alternative forms of finance, especially equity finance, for small SMEs.

Appetite Exists for Increased FDI in Egypt

Appetite Exists for Increased FDI in EgyptRecent political uncertainty in Egypt has badly affected the nation’s economy, and commitment to FDI in Egypt has dramatically fallen because of the country’s instability. However, following the 2014 elections Egypt seems to have entered a phase of opportunity for inward investment.

Locally government commitment certainly exists to address some of the political barriers to foreign direct investment; additionally the government has announced a massive residential property development project that will require foreign financing.

As Egypt’s 88 million strong population is rapidly expanding at a rate of 2.5% per year, so pressure on the housing sector is reaching a critical point.

The government has announced ambitious plans to address this issue with the construction of 1 million affordable homes across 10 Egyptian governorates on 13 plots of land.

There is some confusion over the amount of investment that will come from foreign sources to enable this project: the government initially announced that the housing project would be 100% financed by foreign investment commitment.

Recently however UAE construction giant Arabtec Holding, which has been commissioned to begin the first phase of affordable housing development, stated that the investment required would come from a mix of local and foreign sources.

The government’s commitment to this growth phase is reinforced by their ongoing infrastructure development programme which includes an expansion of the Suez Canal. In other words, this is a government that recognises it must create foreign investment opportunity and support it with favourable policy and action.

Between 2010 and 2012 Egypt’s political uncertainty and ongoing regional instability caused FDI levels to crash. Since 2013 however there have at least been tentative green shoots of foreign investment interest in Egypt.

Now that interest has returned to the nation the government is looking to seize this opportunity, literally capitalise on it, and grow FDI commitment to $10bn for the year 2014/2015.

The majority of foreign investment interest stems from the Arab world with the UAE leading Saudi Arabia and Kuwait.

Self-Driving Cars a New Battlefield

Self Driving Car
Self Driving Car Technology

With Google self-driving cars being already tested in various cities across the UK, Volvo going ahead with its Autopilot system, Mercedes and Audi both demonstrating their self-driving concepts and Apple expressing active interest in the auto industry, the future in which cars without steering wheels cruise the roads is suddenly quite plausible.

Major players are venturing into the futuristic age of self-driving vehicles and technology. Some are well ahead and actively carving the future market out among themselves, while others are trying to jump on the bandwagon in a rush to claim a stake in our auto future.

The question is who will be a winning bet.

Google

Utilitarian and real

Google engineers and software specialists have been working on a driverless car for quite a long time. The cars have been trialled in several states in the US, and this year they are tested on the UK roads as well.

It’s highly probable that Google will be just providing the technology while an actual body will be built by one or several existing car manufacturers. Google is actually ready to give away the software that powers self-driving vehicles; the whole packet of it (the Android operating system, search, voice, social, maps, navigation, even Chauffeur – the actual app responsible for autonomous driving) was offered by Google to motor giants in Detroit. The negotiations with individual car makers were kept secret, however.

Google’s Achilles heel at the time was the cost of the lidar, an acronym for light detection and ranging device, which can be seen mounted on top of a Google car. Google uses HDL-64E model of the device produced by Velodyne Acoustics Inc.

The lidar is packed with 64 laser beams and rotates 360 degrees continuously scanning the surroundings.  At initial price $75,000 to $85,000 each, the lidar was more expensive than every other component in the self-driving car combined, including the car itself!

The producer however recognised the problem and managed to bring the price down from $80,000 for the initial model HDL-64E to $8,000 today with the prospects of reducing the price even further.

Google self-driving cars project has a great support from the British government that is pushing for the UK to become a world leader in the technology; so far it has put £19 million funding into the current UK trials.

It is believed that Google is about five years away from creating a real solid non-prototype car that can be bought or hired for personal use.

Mercedes

Great but not any time soon

Unlike the small and cute Google prototype with its smiley face that looks very “googly” indeed, Mercedes autonomous concept targets to claim a luxury segment of the self-driving car market.

But it won’t happen in any foreseeable future. Mercedes self-driving car is a concept of a concept and, though beautiful and breathtaking, is still far from being a reality. In January this year at the Consumer Electronics Show in Las Vegas, Mercedes revealed their concept self-driving car, a sleek and stylish F015 Luxury in Motion.

The car is luxury indeed outside as well as inside: space and organic materials, six high-resolution touch-screens on the doors to control the car’s features by using gestures, eye-tracking or touch; and swiveling lounge seats—including the two front seats—so that the people sitting up front could turn around to face backseat passengers and easily get in and out the car.

The vehicle drove itself along The Strip in Vegas powered by electricity generated by the car’s twin fuel cells. These fuel cells, Mercedes’s pride and joy, convert hydrogen into electricity and water. The company has been investing heavily into R&D in hydrogen fuel for the last 20 years, and it looks like they are going to reap the harvest pretty soon.

The F015 hasn’t been designed to be released on the market any time soon, for even the swiveling front seats are in contradiction with the existing regulations demanding that a driver must face forward to be able to take over control as soon as it is needed.

It has been designed to provide a glimpse into the future of luxury autonomous cars and to parade Mercedes’ achievements in the fuel cells development. Mercedes’ self-powered car is certainly lined up for production very soon.

As to the F015 its future is vague. When asked, a Mercedes spokesperson said he couldn’t comment on the company’s specific timetable for bringing the model to market.

Volvo

Safe, robust and affordable

Volvo’s project “Drive Me – Self-driving cars for sustainable mobility” is based on cooperation of Volvo Car Group, the Swedish Transport Administration, the Swedish Transport Agency, Lindholmen Science Park and the City of Gothenburg, and is actively endorsed by the Swedish Government.

Among those aspiring to mass-produce self-driving cars Volvo is the first  to put a concrete date on a usually vague estimation of when the first cars with autonomous driving control will be released to the public. By 2017 the company will give first 100 autonomous cars (not prototypes) to actual consumers.

The consumer test will take place on the streets of Volvo’s hometown Gothenburg, in Sweden. The city council has already given their approval, and soon lucky owners will be able to cruise selected public street in Gothenburg in their new autonomous drive controlled Volvos.

Volvo being Volvo, it’s all about safety.

The company that invented three-point safety harnesses and has always been known as one of the safest vehicles to drive isn’t going to fail Volvo lovers expectations. “Drive me” Volvo will be equipped with a complex network of sensors, cloud-based positioning systems and intelligent braking and steering technology.

Seven radars, 12 ultrasonic sensors, five cameras, and a laser scanner will make up autonomous cars’ vision. The system unimaginatively named Autopilot is perfectly able to control every aspect of the driving experience from everyday driving to gridlock traffic to emergency situations.

Should the autopilot be switched off due to bad weather conditions or malfunction, the driver will be prompted by the system to take over control. If the driver fails to do so in time or if the driver is incapacitated, the car will actually bring itself to a safe stop.

Volvo is steadily pursuing its ambition to completely eliminate deaths or serious casualties in a Volvo car by 2020.  Autopilot system is just a next step to achieve the target.

Volvo’s experts and engineers are certain that their Autopilot controlled vehicles are already much safer than any vehicle controlled by a human.

“It is relatively easy to build and demonstrate a self-driving concept vehicle,” says Erik Coelingh, a technical specialist at Volvo Cars, “but if you want to create an impact in the real world you have to design and produce a complete system that will be safe, robust and affordable for ordinary customers.”

So far it looks like Volvo Autopilot cars are first to win the race to the consumer market.

Uber

No dude behind the wheel

In summer 2013 Google, through its Google Ventures, invested $258 million in Uber, an app-based transportation services company that positions itself as quick and reliable taxi and shared-car services.

The year after that there was another round of investments; and Google provided Uber with their most advanced mapping technology Google Maps to enable Uber to develop their own app for drivers and riders. The prospects for the partners were positive.

In January, 2014 Google confirmed their plans to create a driverless shared vehicle. “The technology would be such that you can call up the vehicle and tell it where to go and then have it take you there”, said Google’s representative.

Almost immediately after Google revealed their prototype of a self-driving car, Travis Kalanick, Uber’s CEO,  spoke excitedly about Uber’s plans to get rid of “the other dude in the car” by creating  a self-driving taxi fleet.

“When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away.”

Uber entered into a strategic partnership with Carnegie Mellon University (CMU). The key element of the partnership is cooperation with the National Robotics Engineering Center (NREC) which according to Uber blog aims: “to do research and development, primarily in the areas of mapping and vehicle safety and autonomy technology.”

Autonomy technology is just a different phrasing for self-driving car development.  Although technology-wise Uber is lagging behind Google, the company has an advantage of a network already present and working in 200 cities worldwide.

Uber is not publicly traded yet. Moreover, the company firmly sticks to a policy of restricting the sale of its shares on the secondary market. However, some experts predict that Uber will go public by the end of 2015 or in 2016 at the latest.

Apple

Project Titan

It is rumored that Apple is after its own car.

Indeed, recently Apple has been on a hiring spree attracting key developers from such industries as car safety, renewable energy, battery and hybrid technology and car software systems.

A few days ago Apple was even taken to court by A123 System company, specialising in the car battery technology and research, for poaching its top engineers. Tesla was also complaining. Apple’s mysterious project “Titan” has devoured the most intelligent minds of the car related industries.

The scope of expertise collectively held by the newly hired Apple specialists is such that it allows to speculate that Apple aims to build their own car rather than just produce software for the existing auto industry.  It looks like Apple is muscling in on a self-driving car race.

A bit late, one might say; yet Apple may surprise us all.

Apple’s forte is its rare ability to produce a hit iconic product that everybody loves despite its faults. The company also has a huge pot of cash to invest. The pot holds $178 bn (£118 bn) and makes Apple the biggest public corporation in the world. Hence if Apple does have ambitions to go far beyond CarPlay then the company has all the ingredients to create an amazing autonomous green energy iCar.

 

Strong Fundamentals Support US Luxury Hotel Sector

Luxury US HotelThe luxury hotel sector in America has seen an upswing of international acquisition interest as strong fundamentals continue to support the sector’s growth.

Investors from Asia and especially China have been busy buying up strategic offerings in the US market, where a lack of new development and a very strong upswing in demand is underpinning impressive sector growth.

One of the most recent sales of luxury hotels in America smashed all local records, and established a brand new benchmark for rate per room valuations.

Per-Room-Valuation Up

The Californian Montage Laguna Beach resort sold for $360 million, that’s more than $1.4 million per room, a new record for the regional sector. In fact, only hotels in Hawaii and New York have traded higher.

The luxury hotel market in America was among the first to be significantly damaged by the global economic downturn, but for those hotels that managed to remain open, today the sector has turned around and so have their potential fortunes!

Fundamentals Supporting Luxury Hotel Sector in America

Occupancy rates from all 3 categories of hotel guest, i.e., leisure travellers, individual business travellers and business-related groups, are expanding with no end currently predicted to this trend.

This is the first solid fundamental supporting international interest in the luxury hotel sector.

The second fundamental is the fact that financial and regulatory barriers are incredibly high for hotel developers in America, and they make the construction environment hostile for new project starts – particularly in the most appealing centres in terms of demand such as coastal and city centre.

As a result established hotels, which have weathered the economic storm to date, are currently of intense interest to foreign and domestic investors.

Domestic Investor Interest Benefitting from Cheap Credit

Further supporting domestic investment interest is the fact that real estate investment trusts (REITs) and private equity firms can borrow at record low levels, and have the potential for significant leverage by utilising borrowed money for investment in the strong luxury hotel sector.

There are some stirrings of concern to be aware of however, with some suggesting that the market and the economy are 6 years into a rebound phase, and a market peak should be watched for.

However, as demand is outstripping supply and interest in the hotel sector is being driven by international interest, most are ignoring any voices of warning and continuing to push ahead with acquisition.

Bitcoin’s Arty Sister

Sarah Meyohas, a photographer and an MFA student in Photography at Yale University, has been exploring a new way for art lovers to invest in her works – through digital currency.

In February this year, together with Where Gallery in Brooklyn, Sarah launched a digital currency BitchCoin that had just one purpose: to buy Meyohas’s art.

“If you’re a woman who is taking a stake in your future and aggressive, you’re a bitch,” says Meyohas.

Unlike bitcoin, BitchCoin can be mined by just one person – Sarah herself. The whole process is taking place inside the gallery and is streamed live via a webcam available on Where’s website. One BitchCoin, priced $100, is worth 25 square inches of any one of Meyohas photographic prints, current or future.

BitchCoins are released upon a completion of Meyohas’s work when an unframed archival chromogenic print produced by the artist is locked in a bank vault. Then, depending on a size of the print, a corresponding number of BitchCoins are released into circulation.

When an investor buys a BitchCoin, they receive a certificate with key number encryption with which they can access an account on a free BitchCoin software programme that deals with BitchCoin’s circulation.

BitchCoin has a fixed rate of exchange of 1 BitchCoin to 25 square inches of photographic print, and is totally tied to the value of Meyohas’s works. So as well as exchanging your BitchCoins for actual prints there is a possibility to hold onto them, as their value will fluctuate based on the market demand for the photographer’s artworks.

Where Gallery has high hopes for the artist. “We are so confident in our prediction method that Where will be quite literally investing our exhibition budget directly into her practice, through the purchase of the BitchCoins.”

Sarah Meyohas compares her BitchCoin to the paper money linked to gold reserves that we all used to have some time ago. Her currency is fully asset-backed indeed, and once a BitchCoin-backed print is bought with BitchCoins, the coins are destroyed since they are no longer asset-backed. The only question is whether her works can hold value as well as gold does.

At the launch event in February the artist sold 200 BitchCoins at a fixed rate of $100 per BitchCoin. The first print Speculation is already available for a purchase with BitchCoins.

Sarah Meyohas has a background in international finance and attended Wharton before Yale. She comes from a family with finance related background and has a great interest and understanding of crypto currencies. Her ambitions go as far as making BitchCoin available on a currency exchange for conversion into other global currencies.