There are many reasons why a large majority of people buying motels today have been in the accommodation industry before. Many of the benefits of owning a motel are what keep people coming back to the industry. Within the motel industry today there are more and more people who already own a motel that are acquiring additional motels to add to their portfolio. This has been the case for some time.
Every different business or industry has it benefits, however when comparing one to another consider some of the benefits a motel offers.
High Return on Investment – The returns on investment for motels are strong, depending on certain factors such as location, economic strength of the region, standard of the property, strength of the business, profitability, clientele, etc
Current Market Activity – most recent activity within the market has proved some great buying opportunities. Savvy investors are beginning to take advantage and are picking up some quality properties as economic activity starts to improve.
Report to No One – You are your own boss and the one in control of the business’ future. There is no one to report to or answer questions of. The buck stops with the business owner, who makes the decision on what directions the business takes.
Low Capital Outlay – When compared to other property options motels offer substantial value for money. Consider they produce a high return on that investment, they also include a home/residence and the land generally sits on a prominent site with a large traffic volume past the front door. The downside risk of the investment is generally low as it is underpinned by a strong land and buildings component.
Financing – Banks are historically very comfortable lending for motel acquisitions as they are solid and secure businesses. A low 35% deposit is required with the balance able to be financed, which leads on to the next reason.
Taxation Benefits – This is dependent on numerous factors such as how the ownership structure is setup. The tax benefits of living out of the business includes a large amount the cost one incurs living in their stand-alone home such as insurance, electricity, food, beverages, phone costs, rent/loan repayments, motor vehicle costs, etc.
Strong Cash Flow – Upon commencing operating a motel there is an income from day one depending on the level of occupancy. An operator will achieve a certain level of cash flow immediately as most guests pay by credit card. The amount of cash taken by motels had diminished, however for whatever reason I have noted in more recent years motel owners advising they have been taking increased amounts of cash over the counter.
Limited Stock on Hand – Motels carry very low amounts of stock. Motels with restaurants will carry more stock than those without but generally no more than $15,000, depending on the size of the food and beverage operation.
Ready Market – When the time comes to sell there is always a competitive market eager to acquire good quality motel businesses and properties. The market may have its highs and lows but over the last 22 years selling motels, this has always been the case. Not a bad record of accomplishment for the industry.
Easily Operated Under Management – Motels are comfortably managed by a couple or often one person, so if an owner/operator decides they would like to step back from the business for a while there are many good managers available who can manage a motel’s day to day operations.
Onsite Residence – Offers a home to live on site for a family allowing more family time together whilst operating a business. Children can also get involved in some ways and start learning from a young age.
Building Customer Relationships – For those who enjoy building customer relationships, motels can offer a lot of repeat clientele if the guest is looked after. There can be a lot of satisfaction gained when a customer keeps coming back regularly because they are happy with the service being provided. It is confirmation a good job is being done.