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!
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!