The reason for any company going bust is due to a large number of creditors forcing the company into liquidation. With this hotel investment model, by using investor funds for the purchase and renovation of the hotel, the majority of the time the only creditors are the investors themselves, so no third party is able to come in and force the company into liquidation. The same goes for the operating company – they shouldn’t have any debt, and as long as they are able to reach their target occupancy rates, which is usually based on a business model of 50% to break even and cover investor returns, they should be fine.
If for some reason investors weren’t receiving their returns, they could force the operator out, and have a new operator brought in to run the hotel until the point of buyback. Alternatively, if the developer has other hotels that are performing well, providing they have retained rooms there, they could look to reassign your investment to another hotel, keeping your returns and buyback price the same, but what it does is bring the breakeven down from the underperforming hotel.