EB-5 Hotel Projects: Are They The Right Choice for Investors?

But there’s a lot at stake, and you’re wondering if EB-5 hotel projects are the right fit.

This guide explains everything you need to consider when looking into hotel projects for EB-5 — including why they might not be your best choice.

Let’s Start With the End in Mind - What Are Your Goals with EB-5?

The first thing you’ll want to do if you’re considering an EB-5 hotel investment is to take a close look at what your goals are in doing EB-5. 

If you’re like most people, they’re probably going to look something like this:

1. Getting your visa ASAP, so you can get to the USA
2. Investing in something that will ensure you get your visa by meeting all government requirements. 
3. Making a “safe” initial investment that will most likely allow you to get you your investment back — but, of course, that’s never a guarantee.

Are Hotels Even Eligible for EB-5?

They are. 

Almost any for-profit business can likely qualify as an EB-5 project.

The Language Around EB-5 Eligibility Does Allow For Hotels 

According to the US Citizenship and Immigration Services, USCIS, any new commercial enterprise that’s formed to create an ongoing, lawful business, including … 

• A sole proprietorship
• Partnership (whether general or limited)
• Corporation
• Holding company
• Joint venture
• Business trust; or
• Other publicly or privately owned entity

… may qualify as an EB-5 investment.

This includes hotels.

They further clarify by saying that the investment must be … 

“A new commercial enterprise that was established after Nov. 29, 1990; or on or before Nov. 29, 1990, that was purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results; or expanded through the investment, resulting in at least a 40% increase in the net worth or number of employees.”

Why Hotels Used to Be a Solid EB-5 Investment Strategy

Hotels used to be a secure and safe investment.

In days gone by, people traveled for business and pleasure — and when they traveled, where did they stay? Hotels!

Under the previous EB-5 regulations, a hotel was a great project because you could get a property in one of the busiest cities in the US, like …

• Manhattan 
• New York
• Chicago
• Los Angeles
• San Francisco
• Miami; or 

… where you’d be guaranteed plenty of tourism and business travel. And you could feel confident your investment would be relatively free from danger. 

But times have changed, and hotels have lost their former status as a sought-after EB-5 project.

6 Reasons Why EB-5 Hotel Projects Probably Aren’t Right For You

1. Covid-19 Has Changed How People Behave

Covid-19 has changed our lives in a hundred different ways — including how and why we travel. 

According to the United States Department of Transportation’s Bureau of Transportation Statistics, the number of trips Americans took over the 2020 Labor Day weekend was 2.8 billion less (4.6 billion) than in 2019 (7.4 billion). 

A recent survey revealed that 70% of American consumers acknowledged that their 2022 summer travel plans have been affected by the rapidly rising post-Covid gas prices — an increase of 24% over 2021.

And the pandemic’s extensive use of virtual meetings and video conferencing will most likely persist long-term, meaning a sharp decrease in the need for business travel.

Motcomb’s Investments Are More Economically Resilient Than Hotels

But at Motcomb we like to think outside the box. 

We invest in a variety of innovative, top-performing industries. 

Our active selection project for RCBI investments allows us to dynamically manage our investment allocation across industry sectors — with a specific focus on industries that have proven economic resilience, like: 

• Real estate
• Technology; and 
• Agribusiness

2. Airbnb and Other Similar Services Have Disrupted the Hotel Industry 

Thanks to Covid-19, the world may have been altered permanently, making hotels relics of the way things used to be done. 

While the overall demand for hotels is going down, Airbnb is in its heyday, happily eating into the hotel industry’s former market.

According to Brian Chesky, CEO of Airbnb, the average Airbnb rental period lengthened dramatically throughout the pandemic, with Airbnb revealing a record $1.5 billion in Q4 of 2021 — making it the most lucrative year in the company’s history.

Hotels, on the other hand, have noticed a significant shift of the opposite sort. 

According to the American Hotel & Lodging Association (AHLA), the travel outlook for 2022 is on a positive trend, but continuing industry volatility is expected, with full recovery years away. 

While 2022 occupancy rates and room revenue are projected to approach 2019 levels, the outlook for ancillary revenue isn’t so optimistic. Business travel is anticipated to remain down more than 20% for much of the year, with the expected return of only 58% of meetings and events. 

And with Airbnb and other online vacation platforms being used more and more, the years to come may find hotels an even less safe investment to jump into. 

Motcomb’s Investments Are Likely More Secure Than Hotel Investments

At Motcomb, we have years of experience. We’re neither an agent nor an intermediary, and we’re licensed in the areas of our portfolios and investment opportunities.

In other words — we know what we’re doing. 

We don’t try to fit square pegs into round holes. One size doesn’t fit all, and our wide variety of rare products worldwide means we can personalize a solution based on your specific goals and situation.

And we offer free consultations with accredited investors who are interested in any of our specific programs, including EB-5.

3. Hotel Projects for EB-5 Likely Don’t Fall Within TEA (Target Employment Area), Meaning You Have to Invest More!

It used to be that to qualify as a TEA, the business could be on any census tract with an unemployment rate over 150% of the national average.

But the new regulations only allow for one type of census tract. 

So now, if you want to invest in the lower threshold project of $80,000, your project needs to be located in the narrowed TEA. If it’s not, it’ll be a non-TEA project that comes in at $1,050,000.

With the changes in EB-5 regulations, there is nowhere near bustling metro areas like New York or Manhattan that meet the TEA qualifications. 

So if you’re investing in a hotel project, it’s going to be in the middle of nowhere or in a sketchy neighborhood — which means it is going to be challenging for a hotel project to be successful.

Motcomb’s Investments Are Expedited and Require a Lower Investment Than Hotel Projects

Motcomb’s investments are in rural locations. 

That means they fall within the TEA guidelines and require a lower investment. 

We specialize in expedited solutions to get your principal returned as quickly and securely as possible.

Our experienced team has the resources needed to get you connected to EB-5 projects that may only take weeks — not months or years. 

And our expedited solutions may be able to help you get your green card approved within a 90-day window.

4. You’re Likely Not in “First Position” With Hotel Projects 

Investing in EB-5 hotel projects under the previous regulations made sense in a pre-pandemic investment environment. But Covid-19 has changed all that. 

Now more than ever, what you want to be looking for in a potential investment is an opportunity that puts you in “first position.” 

Here’s what we mean: When you buy a house, the bank gives you a mortgage, putting themselves in first position. If the housing market drops, you may get financially wiped out — while they get their money back.

That’s why, as an investor, you’ve got to have a viable way to get your money back. 

Motcomb’s Investments Have You in “First Position”

At Motcomb, we provide an additional measure of safety for our investors on many of our projects by putting them in “first position.” 

This means you’re operating as your own bank and have a first position lien on your property and equipment. 

So in the unfortunate event that something happens with the project, you can likely foreclose on your collateral and sell it to get your money back. 

5. Hotel EB-5 Investments Likely Don’t Have Government Support

As you’re thinking about the safety of your investment, you may want to consider a project that is backed by some form of government support or involvement.

The great news is that since the pandemic, the government has been doing its best to support supply chain projects and rural industrial or infrastructure projects. 

The bad news — none of those include EB-5 hotel projects. 

6. Hotel EB-5 Investments May Not Be Fully Funded

If a project’s success is reliant on your EB-5 investment for success, your investment is likely at a higher risk. 

That’s why we advise that you work with an experienced, reputable EB-5 investment expert to create the lowest-risk strategy possible.

Motcomb’s EB-5 Projects Will Happen Whether EB-5 Investors Support or Not – Most Likely Making Them Safer

At Motcomb, we’re neither an agent nor an intermediary.

We have years of experience — and we’re licensed in the areas of our portfolios and investment opportunities.

Our seasoned team of lawyers studies and clarifies your goals to find the best investment option for your unique situation.

Then, we closely follow the process, assisting and supporting our clients along the way — from filing and registering your application, to finding a property and beyond.