Before you buy a hotel apartment for the promised 8% return

The brochure shows a pool, a sea view and a guaranteed income, while the contract usually tells a rather different story.

The pitch tends to follow the same script wherever it appears: you buy a room or an apartment in a new hotel or resort, a professional operator rents it out and takes care of everything, and in return you receive a fixed income of 7, 8 or even 10% a year, together with a week or two of free holidays in your own apartment, without ever having to deal with tenants or repairs.

This model, usually called a condo hotel or aparthotel, has been sold to private investors in Poland for more than a decade, it has become one of the most popular ways for foreigners to buy property in Georgia, particularly in Batumi, and it is now on its way to Saudi Arabia. Foreigners have been able to own property there since January 2026, the government approved the zones open to foreign buyers in June, and hotel-branded residences are concentrated precisely in the places where the large tourism projects are being built, along the Red Sea, in AlUla, in Diriyah and in Jeddah. If you live in the Gulf, offers like these will land in your inbox before long, if they have not done so already, which is why it is worth understanding where this model tends to break before you reply to one.

How the model actually works

What you buy is a unit inside a hotel rather than an ordinary flat, and the purchase comes with a long contract, often running for ten years or more, under which you hand the unit to an operator who rents it to guests alongside every other unit in the building. In exchange, you receive either a fixed annual payment or a share of the hotel’s revenue, depending on how the contract is structured.

On paper the arrangement looks like a good deal for everyone involved, but in practice almost every risk ends up sitting with the owner of the unit, while most of the certainty stays with the developer and the operator.

The guarantee is only as strong as the company that gives it

A “guaranteed 8%” sounds like a promise backed by someone with deep pockets, yet in most cases it comes from the operating company, frequently a separate entity whose main asset is the hotel itself. When the hotel struggles, the company behind the guarantee struggles with it, and what looked like a guaranteed income turns into a claim against a business that may have run out of money.

In the first years, the guaranteed payments are often financed from the developer’s margin on selling the units rather than from the hotel’s actual profits, which means that the high price you paid is partly funding the income you receive. Only when that initial period ends do owners discover what the hotel genuinely earns.

Poland learnt this lesson the hard way. When tourism stopped during the pandemic, many owners found that their supposedly guaranteed income was simply not paid, and the problems did not end there. In July 2026 the Polish consumer protection authority brought charges against two companies selling condo hotel units, over advertising that promised 8% a year without properly explaining the costs and the risks, and in a separate case a court found the head of one developer guilty of misappropriating money paid in by buyers, in a judgment that is not yet final. Part of the sector has since needed restructuring, leaving owners to chase rent that never arrived.

The return in the brochure is rarely the return you keep

The headline figure is almost always a gross number, and before anything reaches your account it has to cover service charges, insurance, property taxes where they apply, the regular replacement of furniture and equipment, and the operator’s fee, which can absorb a large share of the revenue. Independent estimates in Poland suggest that the realistic net return often comes to roughly half of what was advertised.

Georgia shows the same pattern from a different angle, because as supply in Batumi kept growing, gross rental yields on apartments fell from around 10% in 2023 to about 7.4% in 2025, and once costs and empty periods are taken into account, net yields are estimated at around 3%, with the possibility of falling to zero or below in a weak season.

You own a room, not the hotel

This is the trap that most buyers notice only when it is too late. The pool, the spa, the restaurant, the lobby and the gardens that sold you the dream usually do not belong to you, but to the developer, the operator or a legal structure in which you have very little say.

While the operating contract is running, this hardly seems to matter, yet once the contract ends it can matter a great deal. In some Polish cases, the rent stopped as soon as the contract expired, and the cost of running the shared facilities, including the pools and spa areas, passed directly to the owners of the units, who found themselves paying to maintain amenities they had never owned and could not sell.

Nobody tells you how long you are committed, or how to get out

Operating contracts often run for ten to fifteen years and sometimes renew automatically, while your own use of the apartment is usually limited to a few weeks a year that have to be booked in advance. Selling is also considerably harder than it looks, because your unit is a hotel room, often without a full kitchen and sometimes without the legal status of a normal home, so the only realistic buyers are other investors, and they will price it on what the hotel actually pays rather than on what the brochure once promised.

If the operator underperforms, you usually cannot simply take your unit back and rent it out yourself, and if you want to leave early, the contract may give you no way of doing so.

The small print worth reading twice

Certain clauses come up again and again in these contracts: powers of attorney that give the operator wide control over decisions about the building, penalties or loss of income for owners who do not accept the operator’s terms, payments made to the developer long before the building exists, and groups of related companies that own the land, construct the hotel, sell the units and run the operation, with money moving between them in ways that owners cannot see. None of these is automatically a sign of fraud, but every one of them shifts risk away from the developer and towards you.

Saudi Arabia is a new market without a track record

The opening of the Saudi market is a genuine change, and some of the branded projects there will no doubt be well run. At the same time, the rules for hotels, serviced apartments and branded residences are still settling in, each project requires its own licences and approvals, and the first wave of developments has no history of paying owners through both good and bad years. A famous hotel brand on the building tells you who will manage the hotel, but it does not tell you that the brand stands behind your return.

What to ask before you sign

Before you commit any money, it is worth asking who exactly pays the guaranteed return and what that company owns apart from this particular hotel, what your net return will be in writing after every cost, in a weak year rather than a good one, and what happens on the day the operating contract comes to an end. It is just as important to find out who owns the shared facilities and who will pay for them if the operator leaves, how you can exit and whether anyone in the building has actually managed to sell a unit, and at what price, and finally where your money will be held until the building is finished. If the seller cannot answer these questions clearly, that in itself is your answer.

It can work, but rarely in the way it is sold

A hotel apartment can make sense for someone who mainly wants a holiday base in a place they love and treats any income as a welcome bonus. As a pure investment, however, a high promised return usually reflects high hidden risk, poor liquidity and heavy dependence on a single company, and compared with a simple, diversified portfolio that you can sell within a day, it remains a very concentrated bet.

Looking at an offer right now?

If you have a hotel apartment offer in front of you, whether in Georgia, Saudi Arabia, Poland or here in the UAE, you have two ways to go about it with me. Join my live webinar Holiday Homes, Guaranteed Returns, Real Losses on 25 November, where I walk through real cases, show you how to calculate your true net return and share a 12-point checklist to use before you sign. Reserve your seat, Early Bird seats are limited. If you’d rather look at your own offer one-to-one, bring it to a mentoring session. We’ll go through the real numbers line by line, test what the guarantee is actually worth, look carefully at your exit and decide whether it fits your wider plan before any money leaves your account. Many of my clients come to me with exactly this kind of decision, so book a free 15-minute chat and let’s look at it together.

This article is general financial education, not investment or legal advice. Before signing any property contract, have it reviewed by a qualified lawyer in the relevant country.