Metrics when owning a hotel/motel

[Andrew Bosco]

Hey all, 

For those of you that are actively buying or have purchased a "Mom and pop" Inn or motel - what metrics matter the most to you? How does your underwriting look? 

I'm an active multi-family buyer/investor and vacation property owner. Just looking for subtle nuances that may be not so obvious in my underwriting. 

[Tyler Winget]

Quote from @Tyler Winget:

Hey Andrew,

Above all metrics - we made sure to pick an area that people were already traveling to, anyways. A vacation-destination market, with year-round travelers. Not just seasonal. Ours was the Poconos, PA market. Seeing you're up Northeast as well, with areas that have both lakes for summer fun and slopes for winter, I think you'll be OK in that regard. 

You asked for subtle nuances that aren't seen in underwriting, so here they are..

1. We moved in. Depending on the size of the property, that may be appropriate, or it may not be necessary. We were at 43 units, young and dumb nothing to lose. We had management in the region anyways so this wasn't as difficult of a decision to bear. Ours was once "mom & pop" too, and is returning to be such with onsite managers 24/7, but all depends on the deal. If you find a vacant mom & pop motel with 8 units and just needs to renovate, obviously that will be a different story. But moving in allowed us to build the vision for the hotel while we were onsite, interact with our first guests to make sure everything was good, and the more. We don't think it'd be nearly as successful today if we / someone else wasn't onsite as often. 

2.Cleaning/Laundry - we knew this would pose a hurdle, but not one as big as we planned. After all, you're running a hotel. High volume, fast turnover. You need to have a solution to this problem from the start. We were blessed to have a laundromat conveniently located down the street and been able to make a deal with the owner. Cleaners - we paid them a contract price per clean, which included labor for laundry and materials for cleaning (clorox/windex/floor cleaner etc.). We obviously supplies consumables. Being that cleaning was guest-paid in the reservation, we were able to control this quite well while still incentivizing top tier quality control with having a contracted per-clean rate. Not hourly. We didn't have time to manage employee cleaners. Cleaning is the lifeblood of this business. Don't be afraid to pay well for it. They also were able to take over our inventory for supplies and linens at no extra charge. It made their jobs easier.

3. Landscaping. We made sure to harbor a good % of our Reno budget just for landscaping, lighting, fire pits, lawn games, etc. People traveling these days don't just want to get away to their rooms, cuddle, and watch Netflix, they also want to explore and have an outlet to be outdoors. You don't need to go commercial-level with these things to get a return on them. Simple is fine, just do it right. We made fire pits and give the option to purchase bundles of wood to guests along with marshmallows/smores. Guests love it. And it's a revenue generator.

This is just a small peak - would be happy to chat more. This was without a doubt my favorite project we have ever done, I'll surely never forget it. 

https://www.airbnb.com/rooms/854353424416830480?adults=1&...

Hope this helps!

 DO NOT FORGET ABOUT SEPTIC SYSTEMS! Whatever is there that's existing , make sure it can handle the volume at which you're planning to rent it out at.