Tokenisation: The new model for investing in hospitality real estate

Investment demand for new forms of financial assets is growing, and tokenisation, i.e., the digital representation of physical or financial assets via blockchain, is beginning to transform the hospitality real estate industry. In 2024, BlackRock launched BUIDL, the first tokenized fund on a public blockchain, demonstrating the growing interest of institutional investors in this new technology.

What is tokenization in hospitality real estate?

In the hospitality sector, tokenization allows the ownership or revenue of hotel properties to be divided into digitally tradable tokens. This method broadens access to investments that were previously only available to large institutional players. Azqira, a Dubai-based company, is a pioneer in this approach, allowing small and medium-sized investors to participate in the development of boutique and resort hotels.

Azqira has already secured €100 million from 30,000 pre-registered investors and has brought around 30 hotels into its system. The investment per hotel amounts to €5 million, targeting properties worth between €15 million and €50 million. The funds are used for expansion, renovation, or refinancing, while the company retains a minority stake in the hotels.

Azqira allows investors to choose the hotel in which they want to invest, offering different packages ranging from €500 to €25,000. These packages come with perks, such as participation in special events at the hotels. Investors do not acquire shares in the hotels but the right to receive dividends from the property’s revenue through smart contracts.

Why tokenization is particularly attractive in hospitality

Hospitality is a particularly attractive sector for tokenization as it combines investment with experience. Investors do not simply buy an asset but have the opportunity to visit the hotels, participate in events, and become part of an investment community. Furthermore, Azqira’s modelling is particularly attractive for small boutique and family hotels that require investments of €3-10 million, amounts that are often too small to attract private equity funds.

Challenges and risks

Although tokenisation is revolutionising investment, there are also challenges. A significant risk is market volatility, as retail investors are more prone to panic, which may lead to sudden liquidations. In addition, the volatility of digital assets and regulatory uncertainty remain critical issues.

However, tokenization in the hospitality real estate investment space opens up new opportunities for investors and hoteliers, expanding access to finance and offering an innovative investment experience. However, as with any new technology, careful risk assessment and understanding of the regulatory framework are required to ensure the sustainable development of the industry.

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