In recent years, with the continuous development of the global tourism industry, overseas hotels, vacation homes, and other tourism real estate have gradually become an important area of focus for investors. Compared with traditional residential or commercial properties, these assets not only serve residential or commercial purposes but are also closely related to the prosperity of the tourism market, seasonal demand, and the overall attractiveness of the destination. However, the investment logic of overseas tourism real estate is not simple; it possesses the dual attributes of “real estate” and “tourism,” meaning that returns depend not only on the asset’s inherent value preservation but also on operational efficiency, destination competitiveness, and the external economic environment. Therefore, many investors need to clearly understand the potential risks and recognize the uncertainties brought about by cross-border investment before entering this field.
Policy and Regulatory Uncertainty
Different countries have significant differences in real estate transactions, property rights systems, land use, and foreign investment restrictions. Especially when it comes to operating assets such as hotels and resorts, policy uncertainty is more likely to affect investment. Some countries have threshold restrictions on foreigners purchasing real estate; some require specific licenses, while others have strict regulations on short-term rental operations, land lease terms, or changes in land use. Furthermore, local governments may impose restrictions or upgrade regulations on the short-term rental market based on tourism management, urban planning, or safety considerations, directly impacting the rental methods and revenue performance of holiday homes. Investors unfamiliar with the legal framework or relying on unprofessional intermediaries are prone to risks related to property rights, taxes, or operating permits, thus affecting the sustainable operation of the asset.
Operational Risks
The operating models of hotels and holiday homes are completely different from residential rentals. Hotels require professional teams to manage guest sources, front desk, cleaning, maintenance, and online channel operations, while even relatively lightweight holiday homes need to consider seasonal occupancy, service quality, and the maintenance of a review system. Uncontrollable operating costs are one of the most easily overlooked risks in tourism real estate. For example, sudden increases in local labor costs, maintenance costs, energy costs, or commodity prices can squeeze investors’ net profits. In addition, if the property management team is inadequate, marketing channels are limited, or service levels decline, occupancy rates will be significantly affected. Tourism real estate is essentially an operating asset, not simply “rental property,” therefore investors must have sufficient operational knowledge or entrust it to a professional management team.
Market Cycles and Seasonality
Tourist destinations typically experience peak and off-peak seasons and are influenced by external factors such as the global economy, the pandemic, climate, flight routes, and visa policies. Occupancy rates for overseas vacation homes or hotels are often unstable, making it difficult to guarantee consistent revenue throughout the year. When tourism performance declines at a destination, revenue can fluctuate significantly. Furthermore, intense competition among popular destinations and the emergence of new hotels or large resorts can divert customers. Simultaneously, changes in regional tourism strategies can alter the customer base, leading to deviations in investment returns. Investors who only focus on peak season performance and ignore the entire year cycle will significantly amplify the gap between expected and actual returns.
Cross-border investment inevitably involves exchange rate fluctuations, especially if asset returns are settled in the local currency, as investors bear the risk of exchange rate losses. If the destination country’s currency depreciates over a long period, actual returns may be significantly weakened. At the same time, tax systems vary significantly from country to country. Tourism real estate involves not only purchase tax, holding tax, and rental income tax, but may also include tourism tax, environmental tax, or special industry taxes and fees. If investors lack a clear understanding of tax regulations, they may easily overlook certain costs, resulting in actual returns far lower than expected. Furthermore, some countries have reporting or regulatory requirements for overseas assets, and neglecting tax compliance may lead to additional risks.
While overseas hotels, vacation homes, and other tourist real estate are attractive, their risks are multi-layered and complex, relying far more on professional knowledge than ordinary real estate investments. Policy and legal uncertainties, the professional requirements for operation and management, cyclical fluctuations in the tourism market, and the impact of exchange rates and taxes all affect the actual return on investment. Ignoring these key points can easily lead to immature investment decisions based on overly optimistic expectations or one-sided information. Therefore, before entering the overseas tourist real estate sector, investors need to fully understand the laws and policies of the target country, determine whether they have the ability to hold and operate the property long-term, and assess the impact of exchange rates and taxes in conjunction with their own financial structure. More importantly, investment should be based on a rational and long-term perspective, rather than being swayed by short-term market trends or marketing hype. Only by comprehensively assessing risks, building a reliable team, and developing a clear strategy can overseas tourist real estate truly become a stable and sustainable asset allocation option.
