Purchasing a motel can be an excellent business venture for individuals or a group of investors. The accommodation industry in Canada, including the western provinces, provides owners with a flexible business that can be grown, diversified, and adjusted relatively easily in response to changing market conditions. Below are five reasons that motels are a viable business venture.
1. Multiple streams of income
Motels can provide more than just overnight accommodation for guests. A motel can increase revenue by adding multiple streams of income. Additional income can be generated through an onsite restaurant, convenience store, gaming pub with VLT’s, an ATM machine, or boardroom facilities that can be rented out to community groups and organizations.
2. Flexible service offerings
Motels, and the accommodation industry in general, offer owners a great deal of flexibility with respect to the level of service offerings. The accommodation industry has three levels of offerings including limited service, mid-range, and extended-stay options. Motel owners can analyze the costs and revenue generated by each level of service offering in their particular geographic location to determine which offers the greatest opportunity for reliably increasing profits. Service offerings can be re-evaluated and adjusted in response to changing market conditions.
3. Owners can decide how involved they want to be
Motel owners can choose to live onsite and be involved in day to day operations or they can remain at arm’s length and hire a team to manage the business. Motels are a great option for a business owner who would like to spend a few years running the business and then transition to a more hands-off approach. With guidance from the right team of professionals, motel owners can create a business and operations plan customized to their preferred level of involvement.
4. Cash flow
With most motels, there is typically established cash flow. Since payments are made daily and reservations are year-round, a new motel owner does not have to wait for a first big purchase or account receivables to generate cash flow. Provided a new motel owner has done their due diligence during the purchase process, future cash flow should be relatively easy to estimate based on historical occupancy rates and upcoming projected reservations.
5. Return on investment
Return on investment for motels is generally healthy. Like any business, it is affected by various factors such as location, physical condition, size, operations, and the current economy. When it comes time to sell, if the business has been run well, revenue streams are diversified, and occupancy rates have been strong then it is more likely to earn a higher sale price. A business plan that outlines future opportunities for growth can help increase the return on investment by showing potential buyers how to continue to grow the business into the future.
Purchasing a motel is a business opportunity that can meet the needs and wants of many business owners. With flexibility in terms of service levels, involvement, and succession planning, a motivated owner can truly create their own optimal balance between work and life. If you have been considering purchasing a business in the accommodation industry, a qualified business broker can help you assemble the right team of professionals, evaluate listings to determine the best fit for your business goals, and help you create a business plan that will propel you towards success once the deal is done.
Contact Acuity Business Group to learn more about accommodation businesses currently on the market.