Archive for the 'Changes in Motel Trends' Category
In the motel industry the question of staff contracts and definitions is often raised with me. It is interesting to hear all the different interpretations and methods of employing staff and paying wages. Legally however as an employer a motelier is bound by statutory law and must abide by the obligations under these laws.
Probably one of the biggest misnomers is that cleaning staff in a motel are casual employees. The term casual employee is loosely used to describe someone under a fixed term contract. This is clearly defined in the act as
Fixed term employment
- (1) An employee and an employer may agree that the employment of the employee will end—
- (a) at the close of a specified date or period; or
- (b) on the occurrence of a specified event; or
- (c) at the conclusion of a specified project.
-
The act goes on to specify that this type of employment contract must not be used to
- to exclude or limit the rights of the employee under this Act:
- (b) to establish the suitability of the employee for permanent employment:
- (c) to exclude or limit the rights of an employee under the Holidays Act 2003
In many cases motels call their staff casuals and pay them as if they are under a fixed term contract in that they pay holiday pay as a percentage of their wages on a weekly basis. Motel cleaners work variable hours but have an expectation when they finish work for each day that at some stage in the near future there will be further work for them. Under the terms of the act treating cleaners as fixed term contract employees is illegal and should the employee have issues at a later date they can claim that they have not received holiday pay and the motelier may be required to pay holiday pay on top of the wages already received.
A motel cleaner is a permanent part time employee with variable hours. They can be employed on a basis where you call them when you need them and tell them when they are not required but they are entitled to all the benefits that any other permanent employee is entitled to. Their employment contract must be in writing stating the terms and conditions of their employment. The holiday pay must be paid when they take their holiday not as a percentage each week. The essence behind holiday pay is that the employee has a break from work as much as that they have holiday pay so it should be paid to them when they are having time off. If they do not have regular rostered days each week then a day they are not working could be considered to be a holiday and paid as such. This must be shown clearly on the pay slip and pay records.
Many motel operators have employees who do not have an employment contract and who are paid holiday pay as a percentage of their weekly wage. As a business operator you can chose to operate in which ever manner you wish but you must be aware that this style of employment relations may leave you open to possible problems at a later stage should your employee become disgruntled and take the issue further. If you are unsure of the Employment regulations and what your obligations are as an employer you should seek legal advice to make sure you are in fact doing things correctly.
April 14 2010 | Articles for current moteliers and Changes in Motel Trends and Entering the Motel Industry | 3 Comments »
The following story in today’s NZ Herald comments on the migration law changes and how this may affect business sales in NZ.
As an accredited business broker I deal with many foreign people looking to make New Zealand their home. Motels have been a favoured option for many of these migrants due to the fact they are able to get a business and a home all at the same time.
This law change due to come in to effect on November 30th could make the process easier and more permanent form the onset, with the chance of permanent residency straight away rather than going though the process of a long term business visa.
This larger target market must be good news for those looking to sell their motel business.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10609740
November 17 2009 | Articles for current moteliers and Changes in Motel Trends and Entering the Motel Industry and Uncategorized | 2 Comments »
Vendor paid advertising is a relatively common practice in the sale of motel properties. This is where a broker presents the seller with a marketing plan and a detailed cost for this plan. The seller agrees to pay for the advertising as specified within the plan.
The marketing plan is then put in to action and hopefully the prospective purchasers start rolling in. As a seller however you need to consider that you are gaining exposure of your property but are also paying to advertise the broker and their company. I know from experience that people reply to an advertisement about a specific property but on further investigation often discover that for some reason or another it does not meet their criteria. At this stage other properties are introduced and discussed. As a seller you have paid for the advertising which has attracted a buyer to an agent and to another seller’s property. Does this make you happy?
I have also known of motel sellers who have decided to take their motel off the market but are unable to do so because they have agreed to vendor paid advertising and know that if they remove the listing they will be presented with an invoice which they are unable to pay. There is no guarantee your property will sell just because you have paid for the advertising. Will the advertising funded by you be beneficial to you or simply reinforce the brand of the broker and company you have listed with?
Research indicates that print media is becoming less effective as a marketing tool and the majority of advertising is now done via some form of web marketing. This is very cost effective and most web sites have a user interface so there is absolutely no cost to upload a listing and display images. Bearing this in mind and the fact that any credible motel broker will have a data base of current purchasers and a referral network there should be no requirement for vendor paid advertising unless you are wanting a specific print media campaign. This should be carefully considered for both cost and response effectiveness. Study the relative statistics for this before committing to a programme.
As a seller you should be asking your broker what the marketing plan will involve, what if any costs you are required to pay and what the broker’s input will be to the cost of any advertising. If their input is in terms of a discount they achieve from a supplier then this should be expressed in terms of a discount rather than dollar terms to you.
As a company we do not promote or ask for any vendor paid advertising. We do not believe that this is in the best interest of you the seller but in fact would be more of a benefit to our company at be at your expense.
If we choose to use print media we fund this ourselves. Just as you do in your motel, we have an advertising budget which we consider to be part of our expenses and therefore our responsibility. Think carefully before agreeing to vendor paid advertising for your motel. What value are you getting for your money and is it necessary?
September 07 2009 | Articles for current moteliers and Changes in Motel Trends and Uncategorized | 2 Comments »
It is important you make the right choices along the way when you are looking to make a major investment such as when purchasing a motel. One of the important choices is that of which broker to use. Often people think all agents are the same and so they just respond to a number of advertisements with lots of different agents. The idea of sameness is far from reality as various agents and companies can be quite different.
Some people acting as salespeople for motels are not business brokers and have not done any specialist training in this area. Others have completed the educational requirements and are accredited by the real estate institute. To my way of thinking it is a bit like the difference between a GP and a surgeon. They have both undergone the same general training but the surgeons with the extra training would certainly be my choice in the specialist area should I require surgery.
Some companies are corporate entities and can often be operated under overseas ownership and conditions while others are small NZ owned and operated. Some companies have policies and procedures which must be adhered to in black and white and others are more flexible and personal in their service. You need to decide which your preference is before contacting a broker.
The internet is a fantastic medium to find information and see what properties are on offer. It can give a great indication of the motel you are looking at but often doesn’t give you much of an idea as to what the agent is like who you will be dealing with. If you register on a web site and download information about a particular motel it is important to realize that you are also committing yourself to the agent attached to that advertisement for any further dealings with that particular motel. Is this what you want?
In order to choose an agent it is beneficial to find out exactly who they are and what they represent. Ask about their background. What qualifications do they have? Have they had experience in the industry? Are they a business broker and do they understand the complexities of a motel. Have a look at their website if they have one. Google their name and see what you come up with.
Talk to the broker and see how comfortable you feel with them. You need to be able to discuss things frankly with your broker and trust what they are telling you. A good broker will be able to understand your needs and criteria and find a property to suit you.
As you can see all agents are not the same and it is a choice which you must make carefully. You are probably making a lifestyle change and investing all your savings in a motel. Take the time to find the broker who will enable this process to be a smooth and enjoyable transition for you.
August 25 2009 | Changes in Motel Trends and Entering the Motel Industry and Uncategorized | 1 Comment »
I recently attended a Debbie Mayo- Smith of www.successis.co.nz workshop on data bases and part of the discussion focused on Monday Lists. OK I thought this must be where we sit down and plan how we are going to spend our week so we don’t waste all our time trying to remember what it was we had planned to do!!!
Well no that wasn’t the idea. Basically the discussion evolved around choosing a day which was the quiet day of the week. (Often difficult to decide if there is one in the Motel Industry). But anyway on the quiet day rather than mucking around you should use the time to gain traction from existing information you have about your customers. If you employ reception staff this works as a double benefit as you are paying them to be there over the quiet day so by increasing their productivity you are hopefully increasing sales and turnover without any increase in staff costs. These lists are also not specific to any one industry and can work in any business but just need to be modified to suit the type of business.
So to get to the nitty gritty what are these lists? Basically it is capturing the information you have about your customers and putting it to use. Firstly we have a “Raising the Dead List” This doesn’t mean turning units in to cemetery plots but rather finding our long lost customers. Most front desk programmes have a good record system which will record the information of your client’s last visit. The raising the dead list means that anyone who hasn’t visited you for say 2 months gets contacted to ask why and if there is anything you could do to make them come back. The contact can be made in a variety of ways such as phone, e-mail or letter but in order to have a discussion and get the person to tell you why they have not returned you really need to talk to them so phone is the best method. You must see what the problem is and work out how to resolve it. This contact makes people believe that they are not just a dollar producing number but that they are important to you and you want to make them happy. It also gives you a method to find out the faults within your business and rectify things which are harmful to the business by causing people not to return to you.
The second list is a 300/500 list. This conjured up images of an intense 300 exercise I do in the gym to strengthen abs but luckily it wasn’t very physical at all. This list is where you pick a number of clients. In this case the number was 500, and offer them a voucher for a service they use which they can keep or give to a friend. A trial was undertaken with 500 clients from a hairdressing business. The hairdresser also had beauty products such as facials etc. The offer was that if the client came and paid for a make up treatment they would receive a voucher for the same value to either use themselves or gift to a friend. Of the 500 clients 300 of them took up the offer and a large proportion of these gifted the voucher to a friend. This meant an instant injection from the 300 people paying for extra services, the possibility that these people would continue to use these services and so their average spend would increase and also on top of this all the friends who were gifted the voucher were potentially new customers to win over on their first visit.
The concept would need to be thought through with a motel. What extra service can you offer to your existing customers? For instance you may choose 100 people whom you will offer a voucher to the same value as the second night if they stay two nights instead of one on their next visit. Isn’t this a great way to increase the number of customers you have just by using your existing information. Also it is easy to track. You can measure the results far more accurately than with the dollars you spend on print or internet advertising.
These are two great but easily implemented ideas to improve your business in a cost effective way.
July 15 2009 | Articles for current moteliers and Changes in Motel Trends and Entering the Motel Industry and Uncategorized | No Comments »
Usually my blog is about giving out opinions and useful information in relation to motels however this time it’s a bit of a reversal and I am asking you for your help by letting me know what you look for in an advertisement for a business.
This is a question which is probably relevant to all real estate sales but perhaps seems to be a bit more complicated with a business sale. Where do we draw the line between confidentiality, the need to show the business information and what details buyers are looking for?
There are probably two views on this subject: one being that the purpose of the information is to encourage a prospective buyer to contact the agent and so if there is too much information on the advertisement there is no need for contact and the agent may miss a potential buyer. The other theory is that an agent needs to put as much information as possible on the advertisement because today’s buyers are much more research savvy and will only call if they have enough details to think it is worth calling about.
If the add is full of photos does it stimulate the interest or does it take the emotional element of the real life touch and feel of the property away from the decision and the buyer makes a decision not to take the inquiry any further and by not contacting the agent eliminates the possibility of gaining more knowledge which could influence their decision.
As buyers of a business what do you expect to see in an add, what makes you revisit a website, and what information do you look for? Do you want long padded details for instance how each motel room is set up the number of beds etc, or is it just the basic facts such as the length of lease, number and type of rooms etc.
What really makes you pick up the phone and enquire in person?
June 23 2009 | Changes in Motel Trends and Entering the Motel Industry and Uncategorized | 4 Comments »
Motels like all businesses must abide by the holidays act. However the nature of the employment conditions within the industry make it a difficult act to abide by for many motel owners.
Most cleaning staff have permanent part time employment with variable hours. When it comes to allocating holiday entitlements this causes a lot of confusion and difficulty for many. Is the holiday day a “normal working day” for that staff member? How many hours will they be paid as holiday pay if they don’t work on a Statutory holiday?
Th following article describes a review of the act which given the right environment may recognise the difficulties some businesses have working within the frame work of the act. I would envisage that MANZ will be doing their best to have an input in to any submissions or opportunities to interact with this working group and as usual put forward the united voice of it’s many members.
Published: 11:29AM Wednesday June 03, 2009
Source: ONE News
The government has set up a working group to review the Holidays Act – a piece of legislation that has been criticised for its complexity and compliance costs.
Minister for Labour Kate Wilkinson says the working group will review the calculation of daily pay, trading annual leave for cash at the employee’s request, and transferring the observance of public holidays.
Business NZ has welcomed the review, saying it is “well overdue” and has been a headache for employers since it came into force.
“The business community has made its concerns known about the Act since 2003 and we are pleased these are finally being heard,’ says Business NZ CEO Phil O’Reilly.
O’Reilly says among other things, the formula for calculating holiday pay uses irrelevant variables and is so complex that it significantly increases payroll administration costs in many companies.
The working group has five members including one each from Council of Trade Unions and Business NZ.
It will submit its report by the end of the year.
June 03 2009 | Articles for current moteliers and Changes in Motel Trends and Uncategorized | No Comments »
Should I pay cash or borrow to get a bigger lease motel? This is a question I get asked a lot. Many people say oh I just want to pay cash for a lease business and it will make things easier. This is not necessarily the case.
The investment required or the cots of a motel will be reflective of the return derived from the motel. The return is usually assessed as a percentage cap rate and so a higher investment will achieve a higher dollar value return. This creates the basis for your decision to borrow or not to borrow.
As a very basic example (not allowing for any critical factors affecting the return) if you look at a motel lease requiring a $500 000 investment you would expect the return to be around $100 000 to $125 000 and comparatively a motel requiring a $750 000 investment you would expect around $150000 to $187 500. Using the lower of these figures it shows that the extra $250 000 invested could return an extra $50 000 per year. If you were to borrow the money to achieve this extra investment at 10% it would cost you $25000 per year in interest and you would retain the other $25 000 of it for yourself.
It is also important to remember that when you invest in a motel business it is not so much the amount of hours you put in but rather the type of work you do which is determined by the size of the business. For instance a small 10 unit motel may require you to do all the physical cleaning where a 20 unit motel may allow you to have cleaners working for you and your role to be more of a supervisory nature. Both businesses however will require you to be there 24 hours a day 7 days a week.
If you look at the dollar return and the labour implications it seems to make sense to borrow the extra $250 000, still work the same 24/7 hours and use the extra income to repay the debt and build on your equity. The current lower interest rates suggests now is a good time for this option. Check it out with your accountant and see what their views are.
March 13 2009 | Changes in Motel Trends and Entering the Motel Industry and Uncategorized | 2 Comments »
How can I make money when it is so quiet?
This question is on everyone’s mind at the moment regardless of the type of business they are in. It is really hard to decide which are the best options for your business when the turnover is decreasing and the bills are still at the same level. How do you make ends meet?
One very common reaction to this problem is for a motelier to say well in order to make more money I have to increase my occupancy. Surely if more rooms are sold then I will have more money, even if I decrease my rate a bit to get people in the door. It must be better to get $80 for my room than hold out for $95 and not sell it.
WRONG THINKING !!!!!
When you are in a business you must look at the bottom line of the business. It is not what is being paid through the cash register that counts but what is left in the bank at the end of the year. When you discount your rooms all your expenses must still be paid, rent, rates etc, so the only place for the discount to come from is the operators profit. You are giving your money away. Look at the attached examples of the return you can expect from a motel with varying occupancy and tariff levels. I have just adjusted the variable costs by the same percentage as the occupancy varied. This is a very simplistic approach but it does illustrate the effects on the surplus which a variance in income and costs will produce.
Motel Income.
| |
|
65% @ $80 |
|
55% @ $95 |
60% @ $95 |
| Income |
|
|
|
|
|
|
|
| Motel |
|
379600
|
|
381425
|
|
416100
|
|
| Other |
|
358
|
|
300
|
|
332.94
|
|
| Total Income |
|
379958
|
|
381725
|
|
416432.9
|
|
| |
|
|
|
|
|
|
|
| Less charge backs |
|
3500
|
|
2975
|
|
3255
|
|
| less cost of goods |
|
6566
|
|
5581.1
|
|
6106.38
|
|
| cleaning |
|
2068
|
|
1757.8
|
|
1923.24
|
|
| Gross trading profit |
|
367824
|
|
371411.1
|
|
405148.3
|
|
| |
|
|
|
|
|
|
|
| Expenditure |
|
|
|
|
|
|
|
| Accountancy |
|
2107
|
|
2107
|
|
2107
|
|
| ACC levies |
|
538
|
|
538
|
|
538
|
|
| Advertising |
|
12644
|
|
12644
|
|
12644
|
|
| Bank fees |
|
3205
|
|
3205
|
|
3205
|
|
| Electricity & Gas |
|
19541
|
|
16609.85
|
|
18173.13
|
|
| General expenses |
|
3177
|
|
2700.45
|
|
2954.61
|
|
| ground maintenance |
|
500
|
|
500
|
|
500
|
|
| Insurance |
|
7979
|
|
7979
|
|
7979
|
|
| Linen |
|
500
|
|
450
|
|
465
|
|
| Motor Vehicle expenss |
2732
|
|
2732
|
|
2732
|
|
| Printing & Stationery |
|
456
|
|
456
|
|
456
|
|
| Rates |
|
13955
|
|
13955
|
|
13955
|
|
| Rent |
|
136406
|
|
136406
|
|
136406
|
|
| Repairs maintenance |
|
14336
|
|
12185.6
|
|
13332.48
|
|
| Replacement furnishings |
500
|
|
450
|
|
465
|
|
| Telephone & tolls |
|
5539
|
|
5539
|
|
5539
|
|
| Subscriptions |
|
3387
|
|
3387
|
|
3387
|
|
| Wages |
|
33395
|
|
28385.75
|
|
31057.35
|
|
| Total expenses |
|
260897
|
|
250229.7
|
|
255895.6
|
|
| |
|
|
|
|
|
|
|
| Cash surplus |
|
106927
|
|
121181.5
|
|
149252.8
|
|
This cash surplus is obviously important but so too is the value image you are creating for your business. Why spend thousands of dollars on advertising promoting your property in the best light and saying how good it is and then undo all this great publicity by saying actually I have overpriced my rooms and so I will give them to you at a discounted rate. Immediately the value of your business has diminished. It is the old story good news spreads fast but bad news spreads faster. As soon as your “discounted” guests leave your motel they start to spread the demise of your business. They tell all their friends that you are desperate and will discount your rooms. It is now the public perception that your rooms are only worth the discounted rate.
What about the guest who doesn’t realize the rooms are discounted and thinks hey this is great value for money (obviously the rooms are really worth more than the price paid). This guest returns to your property only to get charged full price and becomes very disgruntled. It’s exactly the same room and now the price has gone up. They don’t think they had a bargain the first time but rather you have ripped them off the second time. More bad news spreading about your motel !!!
The secret to making ends meet in a tuff financial time and retaining the basis for your business when times come right is to hold on to the value of your product. It is a common perception that guests choose a motel on price. Many surveys have been undertaken and have all shown this is a long way down the list of priorities. Most people will ask about price because they don’t realize what else they are looking for and price is a good starting point. Don’t tell them the price. Ask them what type of room they want. How many people there are etc. Get them talking and then say I think I have a room that would be just right for you come and have a look. GET THEM IN TO THE ROOM. Talk to them on the way and be nice to them. By doing this you have started to build a relationship with them and more often than not they will take the room. Often not even asking the price until they have signed the form. If they don’t take the room and carry on to inspect other properties at least they know what they will get for their money with you compared to the next motel and there is a chance they will return. If you were buying a vacumn cleaner how effective would it be just to get the prices and choose from this information alone. It would be impossible as it is with a motel so your job as an operator is to show them what they will get for their money at your place and convince them it is value.
The other option for enticing people in tough times is to offer value added incentives. Rather than giving a discount which has a flow on effect to the variable costs of the motel offer a free add on such as continental breakfasts, internet connections, late checkout, shuttle service etc. These are all feel good things for the guest but are less expensive for the operator. A continental breakfast may cost you $4 or $5 but the guest will perceive the value to be the full $12 cost of the breakfast. The most important fact though is that you have still retained the value of your room. When times get better you will not be fighting to get your tariff back to where it was before the decline but rather increasing it from its current level.
It is also difficult to maintain your price when you see Joe Blogs down the road advertising a discounted rate at his gate and the cars driving in to his motel whilst yours is no where near full. Just remember the damage he is doing to his business. The number of guests he will loose because they will become disgruntled and the struggle he will have to rebuild his business when things come right. Worst of all though he is working far harder than you to produce a business which will have a lower return and be worth less than yours. This motel will only have a certain number of rooms say 15 so if all the other motels maintain their current prices he can only take a maximum of 15 guests. After that everyone else retains their fair share at the standard tariffs. Let this motel take the bargain hunters who tend to be problematic guests anyway.
It is a very hard thing to watch people walk out of reception when money is tight. Think of it in a different way and it makes it easier to cope with. Every person who leaves because they want a discounted room has in fact built your business value and reputation. Conversely every person who you allow to stay at a discounted rate you have paid at least the amount of discount from your own pocket and more in the diminishing value of your business. From a sale point of view in the examples given there is a possible difference of between $150 000 and $200 000 in the market value of the business.
Why would you want to work harder, earn less and decrease the value of your business so a stranger can stay in your motel and save themselves money?
February 26 2009 | Articles for current moteliers and Changes in Motel Trends and Uncategorized | 17 Comments »
Lately I have been focusing on the benefits of the internet to a business and specifically to a motel business. Here is a good example of the power of the internet and what it can do to help your motel. Ezibed.com has listed some of the accommodation providers, available on their site, based on customer reviews and rankings. It just goes to show how important it is to look after your customer and how powerfull they can be within your business.
Last minute accommodation specialist Ezibed.com has announced its top 10 customer
rated accommodation list in the lead up to this Labour Holiday Weekend.
Release: 13 October 2008
Over 2000 Eziratings have been accumulated in the past six months as part of
the Ezibed.com rating and review process for customers that have booked through
the popular last minute accommodation website.
The collection of these ratings allows customers to make informed decisions regarding
their next business or leisure trip and also allows Ezibed.com to highlight accommodation
properties that are stand outs as far as customers are concerned.
Rydges Christchurch tops the list obtaining a solid 9 out of 10 however Auckland
accommodation properties outweigh other regions with four placings within the
top ten. Both Napier and Wellington each have two properties on the list.
Providing business transparency is critical in today’s environment says the company’s
Managing Director, Gareth Pearce.
“Research shows that in the US 89% of US online buyers read customer reviews
before they buy – 43% always and 22% always. For customers it means an independent
unbiased opinion and to accommodation providers it means receiving feedback for
the things they are doing right and also identifying areas of their business
that need attention.”
“The importance of an online consumer ‘rating’ may one day be more important
to customers than self assessments or nationally accredited rating systems such
as Qualmark”, says Mr Pearce.
The company that was founded in late 2003 has become a leading online accommodation
booking website within New Zealand, recently expanding into Australia, Pacific
Islands, USA and Canada. With over 2000 registered accommodation properties,
& over 50,000 visitors per month looking for accommodation deals, the company’s
growth has been rapid.
The top 10 customer picks out of a maximum score of 10…
1st 9.0 Rydges Hotel (Christchurch)
2nd 8.7 Heritage Hotel (Auckland)
3rd 8.4 Deco City Motor Lodge (Napier)
4th= 8.3 Lake Taupo Motor Inn (Taupo)
8.3 Rendezvous Hotel (Auckland)
8.3 Marineland Motel (Napier)
8.3 Jet Park Airport Hotel (Auckland Airport)
8th 8.2 Airport Motor Lodge (Wellington Airport)
9th= 8.1 Sebel Suites (Auckland)
8.1 Comfort Hotel (Wellington)
Gareth Pearce is adamant that taking a break this Labour Weekend is good for
the health.
“With the Labour Holiday Weekend fast approaching many people have the effects
of a long wet winter and also the recent economic conditions all bottled up inside
of them. So a Labour Weekend escape is highly recommended.”
“There’s a great range of quality accommodation within New Zealand to choose
from through Ezibed.com with some great customer feedback available”, says Mr
Pearce.
Ezibed.com is a privately owned New Zealand company, based within the Hawke’s
Bay.
October 14 2008 | Articles for current moteliers and Changes in Motel Trends | 1 Comment »
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