Maximizing the Value of Excess Land
Turning Unused Space into Profitable Opportunities-Hospitality Edition
In today’s real estate market, investors and property owners are increasingly looking for innovative ways to maximize the value of their assets. One often-overlooked opportunity lies in excess land—underutilized portions of a property that can be repurposed for additional revenue streams.
Understanding the Value of Excess Land
Excess land refers to any portion of a property that is not essential to the primary business or development but still holds potential for income generation. This includes unused parking lots, vacant buildings, or surplus space within an existing structure, representing untapped value. By leveraging creative strategies, property owners can increase returns, attract complementary tenants, and enhance property value without significant capital investment. In the hospitality industry, every square foot of land has potential value. Yet hotel owners and investors often focus on room occupancy rates and food and beverage revenue while overlooking the hidden asset of excess land. Repurposing these underutilized areas into revenuegenerating opportunities can significantly boost a hotel’s net operating income (NOI) and overall valuation.
Creative Strategies for Maximizing Excess Land Value
Ground Leases for National or Local Brands
Many quick-service restaurants or coffee chains seek small parcels of land for drive-thru locations or satellite stores. A ground lease allows property owners to collect long-term income without development costs. For example, a QSR or coffee drive-thru on a hotel property can cater to guests and passing traffic. Brands like Starbucks, Chick-fil-A, or regional chains often seek high-visibility locations, and a ground lease on a portion of land can provide passive income without operational responsibility.
Shared Parking Agreements
Shared parking agreements can be an effective way to monetize excess parking space. If a property does not require all its designated parking, landlords can sublease the extra space to nearby restaurants looking to expand seating capacity, local event venues needing overflow parking, or EV charging stations seeking strategic locations. For example, electric vehicle (EV) adoption has increased, and travelers increasingly seek hotels with charging stations. Partnering with EV charging providers (Tesla, ChargePoint, etc.) can generate rental income or per-use fees, while also attracting eco-conscious travelers.
Outdoor Event or Wedding Spaces
Hotels with unused green space can also convert it into an outdoor event or wedding space, providing event lawns for weddings, corporate gatherings, or live entertainment. Additionally, outdoor dining areas, rooftop bars, and seasonal attractions like holiday markets or summer pop-ups can enhance food and beverage revenue.
Retail or Convenience Stores
Retail or convenience stores can further capitalize on guest and local foot traffic. A small retail kiosk, convenience store, or gift shop can serve guests while drawing in visitors from the surrounding area. This approach works particularly well for resorts, destination hotels, properties near airports, or extended-stay hotels where guests need access to daily essentials.
Self Storage, STR, and Co-Working Office Space
In suburban or mixed-use areas, excess land can also be repurposed into self-storage units or short-term rentals (STR), providing alternative revenue streams beyond traditional hospitality. Additionally, as remote work continues to grow, some hotels are transforming excess space into co-working lounges or leasing land for shared office spaces, creating synergy between business travelers and local professionals.
Why Excess Land is a Goldmine for Hotel Owners
Hospitality real estate is evolving rapidly, with changing guest expectations and shifting market dynamics. Today’s investors need to think beyond room rates and consider how to maximize property value holistically.
By leveraging excess land for additional businesses or services, hotel owners can enhance the guest experience by offering additional amenities, creating new revenue streams that operate independently of occupancy rates, and increasing property valuation by boosting cash flow. These strategic uses of underutilized space not only provide added convenience for guests but also generate passive income, ultimately strengthening the overall financial performance of the property.
Case Study: Transforming Excess Land into a Quick-Service Restaurant (QSR)
A mid-scale hotel located near a busy highway had an oversized parking lot, much larger than necessary for its guest capacity. The owner recognized an opportunity to monetize the extra space without disrupting operations.
A well-known fast-casual restaurant leased a portion of the land for a small-footprint drive-thru location. The restaurant shared parking with the hotel, eliminating the need for major infrastructure changes. The hotel benefited from increased guest convenience (easy access to food options), making the property more attractive to travelers. The rental income from the QSR lease boosted NOI, leading to a higher asset valuation when the owner refinanced. The result? Higher revenue, improved guest satisfaction, and a stronger competitive position in the market.
