Ever wonder why some motels seem to survive over many decades and others falter after a seemingly small period of time. One of the causes for this can often be a lack of maintenance which creates a slippery downward spiral.
One scenario will show a motel which has operators who do the bare essentials when it comes to maintenance and take out all the excess money as profit on the motel. They do not spend any money on replacements until items are irreparable. They then sell the complex at a reasonable price because the profit looks good and the next operators use the same ethics when operating the motel. After three or four of these types of operators the motel has deteriorated badly. The tariff cannot be increased as the guests will not pay more for a sub standard unit, the number of return clientele decreases due to people being dissatisfied with facilities which do not work or look old and uncared for and the cost of all the deferred maintenance is too much for the operator. This results in the business profit reducing and the value of the business decreasing. At some stage one of these operators will need to spend a large sum of money on maintenance or sell for a lower price than they purchased at.
The alternative scenario shows a motel which has operators who continually upgrade their facilities. They replace items on a regular basis and before they become sub standard, they continually look for additions or improvements which will enhance the guests stay and they build the business year after year. By having a complex which is perceived by the customers as being cared for and providing good facilities they have a strong customer base and therefore are able to increase tariffs periodically. This ultimately results in a higher profit and a more valuable business when it comes to the selling stage. A change of hands in this scenario sees the new operators continuing with these ethics and the value of the business continuing to grow.
The underlying point is that a motel operator needs to look at a bigger picture than just how much profit is in the bank today. The impact of this profit on the future is just as important. By spending money on your motel when it is needed you will retain the quality of your business and make a larger profit at the selling stage. There is an old adage which holds true even today. Sometimes you have to spend money to make money.
February 15 2010 | Articles for current moteliers and Entering the Motel Industry and Uncategorized | No 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 »