There is a refinery in my town. 99% of my renters are contractors doing short term work at the refinery. A cheap motel is $400/week, and that's what I charge for a 2 BR STR. Over the course of 6 years, I've slowly taken most of the business from the cheap motel, mainly through repeat customers and referrals. The 3 main advantages of an STR over a motel room are being able to cook, doing laundry, and having more space.
The owner of the cheap motel sold it this month, but is helping run it. The new owner used to be a welding inspector, a contractor, just like all my tenants. Of course the new owner bought the motel with every intention of making money by doing a better job than the previous owner.
What would you do if you ran the motel to compete against STRs? And what would you do as an STR owner to offset what the motel is doing new?
1. Motel puts in a food truck in the parking lot. People still have to pay for their food, and they can't cook for themselves. It may not be open 24/7 like the kitchen in a STR.
2. Motel provides laundry service. Guests might still have to pay for this service, and it may not be available 24/7 like it is in a STR.
3. Motel lowers their rates. They are already the cheapest place in town, but I can go down on price if they do.
4. Motel lowers their rates. I can keep a base rate the same for a bigger house. $400/week now rents a 3 BR.
5. Motel lowers their rates. I can put a 3rd bed in all the 2 BR STRs.
6. Motel offers better service. My renters get a place to shoot guns and hunt, my 40 acre back yard.
7. Motel puts in Smart TV's and faster internet. I already have Smart TVs in half my units and 15.0 Mbps WiFi in all.
8. Motel has a cookout once a week or every few weeks for their tenants. I can do the same, and I have a the capability to do it at an apartment complex that has 10 STRs.
9. Motel owner runs for city commission and tries to ban or limit STRs. I need to be friends with other commissioners.
@Paul Sandhu we dealt with this in one of our towns we do STR's in and we saw it coming. The hotels and motels banded together and went to the town and demanded STR's have a permit just like them. So, they implemented a $75 per unit license fee and an inspection each year. It wasn't a huge deal except they wanted this fee for every single one. Again, towns are all about revenue and if they think they can derive a source they will be all over it.
I gathered several past experiences from other nearby towns on this subject and was able to get a license per owner, but it took an attorney and several pleas from the "little guy" battling the big bad hotel industry. It worked but took time.
Trust me, the hotel industry is watching and formulating ways to eradicate STR's and BnB's from their areas. They are paying lobbyists big money to make this happen. I don't think it will effect small towns as much but in a lot of cities the fight is on! Take care.
The new owner lives about 2 hours away, so I don't think it is likely he would try to run for city commission. This is a small town. There are 3 first class hotels in town. By first class I mean they are $600+/week, free breakfast, indoor pool, weight room, meeting center, etc. They seem to have enough customer vehicles in their parking lot every evening to make a profit. The kind of people I rent to don't stay in $600+/week hotels. They stay in the cheap ones. The cheap motel owners probably don't have enough money or influence the city and its regulations. The big hotels have the money but are not losing any of their market share to STRs. So they would have little to gain by regulations regarding STRs.
@Paul Sandhu have you put the motel out of business yet?
He's not out of business, but his occupancy is probably 1/5 of what it was 6 years ago. It's a 40 room motel with no amenities other than a vending machine. I have 82 beds, so we are about the same size. I drive by every evening and there are 0 to 4 vehicles in the lot. Years ago there would be 20+ in there every night.
The superintendent for one of the companies lived there for 2 years. He always sent his contractors to that motel, and the motel would give him a discount for the week. He said slowly his workers found out about my houses and they would stay a week in the motel then move into one of my STRs. He would have dinner with them at the house, he'd look around and see all the amenities, and he'd see how much they were paying. He told me that there is no way the motels can compete with my STRs, and the only reason they stay in business is the single night guests.
He eventually was promoted, and is no longer in town. But he does visit whenever shtf at the refinery. When he does, he stays with me. His replacement and his replacements foreman have been renting a STR from me since December 1 of last year.
On Friday, an essential component of the refinery broke down. The superintendent called me in a panic and needed helping getting an emergency crew in to the refinery. I end up coming in to work at 7am on a Saturday just for this company to give 8 drugs screens to the crew in order to get into the plant. None of the 8 are in a motel. Guess where they stay?
@Paul Sandhu why didn't you buy the hotel?
1. I already have 82 beds. Doubling the number of beds is overwhelming.
2. The motel is not making much money. Maybe I could turn it around? But that would come at the expense of making less money with my 82 beds.
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