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white pine

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More questions, more aspiring than angst.
In previous posts, I said I figured I needed an occupancy rate of about 25% to do a little better than break-even. I based this by adding expenses up and then factoring the potential earnings of the property (no. of rooms x rate x days open). At 25% of this potential earning we would be OK. In other responses I understand some feel this might be a pie in the sky occupancy rate? Or am I getting this wrong? The last statistic I could find posted 11/09 area occupancy rate in the low 30% range-- November not being a peak season. Am I looking at something wrong?
Room rates I based on other rates in the area. ( I compiled a spreadsheet of the "competition"). I actually feel our rates could be higher because I feel the lake setting, grounds and use of a boat add a lot of value. DH found a book "Hospitality Management Accounting" by Jagel & Ralston. They have a rule of thumb measure: price of property divided by # of rooms = average room price. This statistic seem ed low to me. Also another method looking at needed income as a factor in total expenses using a fixed occupancy rate to determine room rate. This is quite similar to what we did, although we adjusted the occupancy rate to our needs, rather than adjusting the room rate. Also looked at excel sheet by inngenious, and various B&B books.
In some ways I am comparing apples and oranges here. The property has an 8 unit motel and will eventually have the 12 unit remodelled inn (currently has 32 guest rooms and five baths! ) The cabin would also add to the income stream when an owners quarters are available in the inn. I figure that having more available rooms is a good thing for weekends and special events in the area, because while operating expenses go up during these times, the fixed costs do not, allowing us to maximize the profit making here. The business will be seasonal, and the buildings shut down to minimize utility outgo during the off months. We will live in our other home off season (which is also lakefront and could be rented out for summers).
Add to this mix the historic preservation tax credits for the renovations and possibly tax credits for conservation easements on the property to reduce taxes, and I feel like I'm trying to give Medusa a perm .!
Looks like we may have to have a sprinkler system (new well, 400amp service & pressure tank) waiting for the total on that too. Still doing my homework!
Your comments and insights are of great value to me, so I once again appeal to you here to help me make sense of this!
 

wendydk

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25% occupancy is likely reasonable for existing established properties....generally speaking, the rule of thumb is to take what existing properties' occupancy and cut it in half for at least your first year.
 

Innkeeper To Go

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white pine, in your first year you may not reach the occupancy of the local area - or you may slam it to pieces.
It depends on so many things.
If you are filling a need for lakefront family-friendly property that otherwise doesn't exist, your place could really take off with a smart marketing plan.
What you will need to know is how many visitors are actually coming to the area in season. What percentage of those can you realistically reach - before they've made reservations somewhere else?
The most likely scenario is that you will start out with lower occupancy but folks will discover your place while they're already on vacation in the area. They'll remember you for the future but your first year will be one of introductory rates and snagging guests when you can.
If you plan, though, you can do better than that. That would mean having in play a terrific publicity campaign to include saturating relevant media with press releases, getting brochures everywhere prospective guests may stop in for info, and a great website coupled with an effective online advertising campaign.
Once you buy and start renovating, you can begin with a media campaign. Make sure your excitement about bringing this terrific property back to life is the subject of local chatter. Get photos of the work in progress out there and plans for when you're going to open.
Make sure other innkeepers in the area know you, know you'll be referring folks to them when you can, and get them to send overflow guests to you as well. A strong referral rate can help you meet your first year goals.
BTW, the conservation easement is not only a wonderful idea fiscally, it's a great step in the direction of green lodging. Another niche you may be able to fill while at the same time establishing a role for yourself as a steward of the land.
 

Morticia

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different.
 

white pine

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
 

Innkeeper To Go

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
.
white pine said:
How many people want to be in a construction area?
Zero.
If you cannot keep an area completely quiet and clean of all construction evidence, don't open.
The last thing you need is for the first impression guests get is of an inn that doesn't take their needs first.
Guests will trash you online at the first sound of a hammer. Don't go there.
 

Morticia

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
.
OK, back to the equation...yes, better sense now, but still unattainable numbers because no one runs 100% occ, even tho many come close in their peak season. But, what the number says to me is that I should never charge less than that $ amount because I don't have 100% occ.
Do a little research on the occ numbers data...is every property listed in there considered 'year round'? For 12 months, my occ (last year) is awful. But, if I only calculate it based on being open 46 weeks, it gets much better. So you need to know what the raw numbers are, too.
You have one of those 'neat' motels then! Good for you, that's a draw, definitely. Especially for people my age who remember going on family vacations (few) but staying at fun motels along the way. You have to have those metal lawn chairs to sit on!
Construction + guests doesn't always work. Now you CAN be doing 'quiet' construction that doesn't involve a lot of hammering and power tools and be ok. I know we had a ton of guests who are very proud to have been here 'when the wallpaper was going up.' (23 years ago and they're still coming.)
I'm enjoying spending your money, keep the questions coming!
 

Innkeeper To Go

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
.
OK, back to the equation...yes, better sense now, but still unattainable numbers because no one runs 100% occ, even tho many come close in their peak season. But, what the number says to me is that I should never charge less than that $ amount because I don't have 100% occ.
Do a little research on the occ numbers data...is every property listed in there considered 'year round'? For 12 months, my occ (last year) is awful. But, if I only calculate it based on being open 46 weeks, it gets much better. So you need to know what the raw numbers are, too.
You have one of those 'neat' motels then! Good for you, that's a draw, definitely. Especially for people my age who remember going on family vacations (few) but staying at fun motels along the way. You have to have those metal lawn chairs to sit on!
Construction + guests doesn't always work. Now you CAN be doing 'quiet' construction that doesn't involve a lot of hammering and power tools and be ok. I know we had a ton of guests who are very proud to have been here 'when the wallpaper was going up.' (23 years ago and they're still coming.)
I'm enjoying spending your money, keep the questions coming!
.
Morticia said:
You have one of those 'neat' motels then! Good for you, that's a draw, definitely. Especially for people my age who remember going on family vacations (few) but staying at fun motels along the way. You have to have those metal lawn chairs to sit on!
Ditto to the retro lawn chairs. Retro motels are all the rage these days.
Besides, I just love those chairs!
 

Breakfast Diva

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It looks like you're on the right track trying to figure out the occupancy rates and room rates.
Are there other ways this property can generate income other than just occupancy?
  • Package deals,
  • movie & dvd machine rentals from the office for your motel guests (complimentary to the more upscale rooms)
  • small gift shop that could be set up in an empty room that can sell t-shirts, key chains, post cards, etc.
  • lake excursions
  • packaging with other businesses, etc.
  • I know the restaurant won't be up and running for a while, but maybe you can figure out a way of selling a continental breakfast in a basket that can be delivered quickly to the motel room, etc as an upsell.
Try to think outside of the box for other streams of revenue.
 

Don Draper

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
.
I have seen that formula when we were buying here but it was more of an appraisal tool that a projections tool if I remember correctly. If you can calculate the cost per guest room you can compare that with other/similar properties, which is helpful when the properties are very different in size, etc. But it's just a generality I think.
 

Don Draper

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Did you think of approaching Country Living or Home & Garden, etc to be part of the refurb? We stayed a really wonderful Inn in NY last year and that was how the woman financed refurbishing her Victorian...she had to use certain brands for fixtures, etc. but the cost was fully covered, then she got a huge spread in the magazine when it was finished.
The blogging of the refurb is a wonderful idea, really interesting to folks who've stayed there before who will be a huge target audience for you.
 

EmptyNest

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Did you think of approaching Country Living or Home & Garden, etc to be part of the refurb? We stayed a really wonderful Inn in NY last year and that was how the woman financed refurbishing her Victorian...she had to use certain brands for fixtures, etc. but the cost was fully covered, then she got a huge spread in the magazine when it was finished.
The blogging of the refurb is a wonderful idea, really interesting to folks who've stayed there before who will be a huge target audience for you..
BOy that sounds like a one in a million chance/ opportunity. I don't know that those magazines are into motel remodels though

 

Don Draper

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Did you think of approaching Country Living or Home & Garden, etc to be part of the refurb? We stayed a really wonderful Inn in NY last year and that was how the woman financed refurbishing her Victorian...she had to use certain brands for fixtures, etc. but the cost was fully covered, then she got a huge spread in the magazine when it was finished.
The blogging of the refurb is a wonderful idea, really interesting to folks who've stayed there before who will be a huge target audience for you..
BOy that sounds like a one in a million chance/ opportunity. I don't know that those magazines are into motel remodels though

.
Well, it would be all in the way you approached it. Especially for the Inn's renovation. People are really big into the "nostalgia" arena right now.
 

Innkeeper To Go

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Did you think of approaching Country Living or Home & Garden, etc to be part of the refurb? We stayed a really wonderful Inn in NY last year and that was how the woman financed refurbishing her Victorian...she had to use certain brands for fixtures, etc. but the cost was fully covered, then she got a huge spread in the magazine when it was finished.
The blogging of the refurb is a wonderful idea, really interesting to folks who've stayed there before who will be a huge target audience for you..
BOy that sounds like a one in a million chance/ opportunity. I don't know that those magazines are into motel remodels though

.
Well, it would be all in the way you approached it. Especially for the Inn's renovation. People are really big into the "nostalgia" arena right now.
.
Rupert said:
Well, it would be all in the way you approached it. Especially for the Inn's renovation. People are really big into the "nostalgia" arena right now.
Good point. I know some really wonderful motels that have done a great job of going retro, both here on the west coast and back east.
The key is really doing it well, which, of course, the key to renovating any great inn.
 

white pine

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
.
OK, back to the equation...yes, better sense now, but still unattainable numbers because no one runs 100% occ, even tho many come close in their peak season. But, what the number says to me is that I should never charge less than that $ amount because I don't have 100% occ.
Do a little research on the occ numbers data...is every property listed in there considered 'year round'? For 12 months, my occ (last year) is awful. But, if I only calculate it based on being open 46 weeks, it gets much better. So you need to know what the raw numbers are, too.
You have one of those 'neat' motels then! Good for you, that's a draw, definitely. Especially for people my age who remember going on family vacations (few) but staying at fun motels along the way. You have to have those metal lawn chairs to sit on!
Construction + guests doesn't always work. Now you CAN be doing 'quiet' construction that doesn't involve a lot of hammering and power tools and be ok. I know we had a ton of guests who are very proud to have been here 'when the wallpaper was going up.' (23 years ago and they're still coming.)
I'm enjoying spending your money, keep the questions coming!
.
The room rate formula was I think (as Rupert sez below) more of a comparison tool, it didn't assume any set occupancy rate-- just a simple ratio. Didn't seem a good standard to use to actually set the rate. The one that uses expense data seems a better idea.
The occupancy rate I came up with is a personal one. It means based on our projected annual expenses that over the 20 week season we need to book at 25% to make money. I know this is all apples and bananas, but doesn't this seem do-able? Two motel rooms and three inn rooms booked half the time?
The place is really way cool. A snapshot in time --in the upstairs lobby is a Reader's Digest w "Will Castro's Cuba go Communist?" The Juke box in the bar (no we won't re-open that except as the breakfast bar) is full of oldies.
Ta again
 

white pine

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
.
OK, back to the equation...yes, better sense now, but still unattainable numbers because no one runs 100% occ, even tho many come close in their peak season. But, what the number says to me is that I should never charge less than that $ amount because I don't have 100% occ.
Do a little research on the occ numbers data...is every property listed in there considered 'year round'? For 12 months, my occ (last year) is awful. But, if I only calculate it based on being open 46 weeks, it gets much better. So you need to know what the raw numbers are, too.
You have one of those 'neat' motels then! Good for you, that's a draw, definitely. Especially for people my age who remember going on family vacations (few) but staying at fun motels along the way. You have to have those metal lawn chairs to sit on!
Construction + guests doesn't always work. Now you CAN be doing 'quiet' construction that doesn't involve a lot of hammering and power tools and be ok. I know we had a ton of guests who are very proud to have been here 'when the wallpaper was going up.' (23 years ago and they're still coming.)
I'm enjoying spending your money, keep the questions coming!
.
Duplicated info deleted going for coffee.
 

gillumhouse

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If your research shows that your area did 30% in occ in 2008, you might almost assume that it did less last year. That is not true across the board, however. MANY locations saw a sharp uptick in occ last year.
I'm curious about the equation for pricing rooms...price of property (what you paid for it?) divided by number of rooms = rate per room?
So, if you paid a million for this place and have 32 rooms, the ave price of the room is $31250? I'm guessing that it's meant to be that is what the room should earn in a year in which case $85/night is about ave. However, that is if the room is full every night. If you are assuming a 25% occ rate, your rooms would have to be priced at $343/night to get the same return.
I'm trying to do this math for my place to see if it comes close. And it's not even in the ballpark.
When we bought, we assumed that 25-30% of the guests would look elsewhere the first year. And tried to determine if we could survive on that. If you are going to dramatically change things you may find that none of the repeats return.
You are in the enviable position of being able to price rooms according to what the guest will get. The motel units perhaps earning less for you and the B&B rooms more. And the cabin in a class by itself. And the dining part a whole different rev stream later on.
Obviously, if you have a lot of expenses coming up quickly, ie- before you can open, that's a whole other can of worms. The cliche that it's the second owner of the property who makes the money may not be true in your case. It may be the third owner who makes out after all the work is done.
Doing the spreadsheet is an excellent way to keep tabs on the comp and calculate the going rate for the area. But don't discount what you're offering if it is very different..
Oops! The rate won't come out right because I missed a step in my post. For some reason my text kept disappearing into the netherworld. In my haste to re-post I missed a step it s/b: Cost divided by rooms= $ per room, --then divide that by 1, 000. Point well taken here that the rate is intended as a year round business. That would explain why the rate is much lower than I figured-- I would be open fewer weeks. I adjusted for being open only 20 weeks. Anyway the method of looking at expenses first seems a better method to me. Oh, and the statistic is for the area as of 11/09, the most recent update. The state has a good tourism industry web site geared for business.
We debate even being open the first year-- IF we buy. How many people want to be in a construction area? , This is where the tiered LLC becomes interesting. If we house construction personnel in the motel the LLC running the motel can charge for their rooms. The property holding company would pay for their lodging as part of the expense of the remodelling thereby putting some cash-flow onto the books. I know it is not actual cash in to the equation, but it helps to build the books. There is the possibility of some hands on historic preservation workshops there as well -- possibly tying into community economic development. If we buy and open the motel, I would plan a "soft" open. Letting people know that construction will be underway on the inn. Using this time to market seems a good idea. Those who have been advising on the project suggest a blog to track the history of the project.
Most of the "old timers" stayed in the motel. This is a mint "mid-century modern" which has it's own character & good size rooms. Aside from upgrading the beds -- which are comfortable but full sized. We would change very little here, so I think they would come. I hope the heir still has the "card" index of customers. If not we will advertise & email the groups we know were staying there.
Good comments as always--thanks!
.
OK, back to the equation...yes, better sense now, but still unattainable numbers because no one runs 100% occ, even tho many come close in their peak season. But, what the number says to me is that I should never charge less than that $ amount because I don't have 100% occ.
Do a little research on the occ numbers data...is every property listed in there considered 'year round'? For 12 months, my occ (last year) is awful. But, if I only calculate it based on being open 46 weeks, it gets much better. So you need to know what the raw numbers are, too.
You have one of those 'neat' motels then! Good for you, that's a draw, definitely. Especially for people my age who remember going on family vacations (few) but staying at fun motels along the way. You have to have those metal lawn chairs to sit on!
Construction + guests doesn't always work. Now you CAN be doing 'quiet' construction that doesn't involve a lot of hammering and power tools and be ok. I know we had a ton of guests who are very proud to have been here 'when the wallpaper was going up.' (23 years ago and they're still coming.)
I'm enjoying spending your money, keep the questions coming!
.
The room rate formula was I think (as Rupert sez below) more of a comparison tool, it didn't assume any set occupancy rate-- just a simple ratio. Didn't seem a good standard to use to actually set the rate. The one that uses expense data seems a better idea.
The occupancy rate I came up with is a personal one. It means based on our projected annual expenses that over the 20 week season we need to book at 25% to make money. I know this is all apples and bananas, but doesn't this seem do-able? Two motel rooms and three inn rooms booked half the time?
The place is really way cool. A snapshot in time --in the upstairs lobby is a Reader's Digest w "Will Castro's Cuba go Communist?" The Juke box in the bar (no we won't re-open that except as the breakfast bar) is full of oldies.
Ta again
.
I am looking forward to the updates and (ashamed to say) photos of the finished product! You haveme drooling already!
 

wendydk

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One of the forum members in California has something similar to the type of place as you're thinking about...maybe they can chime in!
 

white pine

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It looks like you're on the right track trying to figure out the occupancy rates and room rates.
Are there other ways this property can generate income other than just occupancy?
  • Package deals,
  • movie & dvd machine rentals from the office for your motel guests (complimentary to the more upscale rooms)
  • small gift shop that could be set up in an empty room that can sell t-shirts, key chains, post cards, etc.
  • lake excursions
  • packaging with other businesses, etc.
  • I know the restaurant won't be up and running for a while, but maybe you can figure out a way of selling a continental breakfast in a basket that can be delivered quickly to the motel room, etc as an upsell.
Try to think outside of the box for other streams of revenue..
Lots of good ideas to think about! I particularly like the breakfast basket. It's a nice add on & one thing I always lamented was that I had to go out for breakfast (not even coffee there!).
I want to be careful not to stretch myself to thin by going in too many directions tho. I was thinking of packaging with other businesses.
Thanks again everyone, DH sez he is amazed how helpful you all are!
 

Morticia

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It looks like you're on the right track trying to figure out the occupancy rates and room rates.
Are there other ways this property can generate income other than just occupancy?
  • Package deals,
  • movie & dvd machine rentals from the office for your motel guests (complimentary to the more upscale rooms)
  • small gift shop that could be set up in an empty room that can sell t-shirts, key chains, post cards, etc.
  • lake excursions
  • packaging with other businesses, etc.
  • I know the restaurant won't be up and running for a while, but maybe you can figure out a way of selling a continental breakfast in a basket that can be delivered quickly to the motel room, etc as an upsell.
Try to think outside of the box for other streams of revenue..
Lots of good ideas to think about! I particularly like the breakfast basket. It's a nice add on & one thing I always lamented was that I had to go out for breakfast (not even coffee there!).
I want to be careful not to stretch myself to thin by going in too many directions tho. I was thinking of packaging with other businesses.
Thanks again everyone, DH sez he is amazed how helpful you all are!
.
I loved the breakfast basket we got in Carmel. Very simple: cereals, milk, pastries, juice, fruit. The coffee maker was in the rooms along with bowls & silverware.
 
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