Crowdfunding, the practice of funding a project or venture by raising many small amounts of money from a large number of people, may still be a fledgling source of equity, but it's starting to have in the presence in the hotel industry, with big, well-known brands.
According to multiple outlets, the owner of the Hard Rock Hotel Palm Springs in California is selling stakes in the 163-room resort, with investors receiving such benefits as improved bookings, room-rate discounts and free use of a poolside cabana set aside for hotel owners.
The offering, which started yesterday, is reportedly the first of its kind for an existing hotel, according to online marketplace Realty Mogul and Kittridge Hotels & Resorts LLC, the property’s majority owner.
According to the Los Angeles Times, the hotel is seeking at least $1.5 million in online crowdfunding from individuals to bring new acts to the hotel, make improvements to its Rock Spa and maybe add a nightclub.
The minimum investment is reportedly $10,000.
“With crowdfunding in the lodging space, what you’re looking to do is not just provide a stake in a hotel but also perks,” Steve Cinelli, CEO of online marketplace Primarq Inc., told Bloomberg. “Besides raising capital, you’re building an audience. That’s why lodging makes so much sense for crowdfunding.”
Kittridge purchased the hotel in September 2012 for an undisclosed price. The hotel was closed for renovations last July and reopened under the Hard Rock brand in October. Kittridge reportedly spent $8 million on the conversion and upgrades.
“We expect a fairly large amount of investor interest because we have many fans of the hotel and the brand,” said Andy Carpiac, president of Kittridge. “They come here and stay with us, they spend money here, they bring their friends and family and act like real owners, which they should. It benefits them and it benefits us.”
The individuals who want a slice of the hotel must be "accredited investors," defined by the U.S. Securities and Exchange Commission as having annual income of $200,000 per individual or $300,000 per couple, or a net worth of more than $1 million not counting the value of the primary residence.