Anyone Know About The Hotel Business? (2 Viewers)

[Joe Bryant]

I've always thought hotels were an interesting business.

Being able to have something fun like the Modern in Boise or the Ace (now Clyde) in Portland

The last time we were at the Modern the talk turned to if it would be a good business.

It's one I know nothing about.

Anyone here know about it?

I saw this thread today and it made me think. https://x.com/SievaKozinsky/status/1933312044318798342

 

[massraider]

It's a really good business.

That example you shared is a little different, it won't be a big money maker, but the owners will enjoy owning it, and will make their money when they sell.

But the math really works in a lot of different business models. If you can get people to pay you a few hundred bucks to sleep one night, and you can add a function room or two, you can clean up.

I have a friend who bought a little compound for nothing in Costa Rica, turned it into a boutique retreat, and just hosts one yoga group after another, all year long. Printing money.

 

[bigbottom]

I’m involved a fair amount in the ultra-luxury hospitality space, both on the property management and property ownership sides. It’s a fantastic business to be in or invest in.

 

[Joe Bryant]

It does feel pretty "AI proof" as well. At least until we get to where we all plug into the matrix for vacation.

 

[massraider]

The ancillary can be where the money is.

If you have a robust convention/meeting/ event business attached, the room income won't matter.

 

[Joe Bryant]

The ancillary can be where the money is.

If you have a robust convention/meeting/ event business attached, the room income won't matter.

Thanks. What else have you seen that's profitable for the "ancillary"? I've not really thought of that angle but I can see how it would make sense.

Is it a thing where the room income is sort of a break even and you make your profit on the "other" things? Can you elaborate on what you've seen work well there beyond convention/meeting space?

 

[massraider]

Thanks. What else have you seen that's profitable for the "ancillary"? I've not really thought of that angle but I can see how it would make sense.

Here's a fun one.

In my neck of the woods growing up, there was/is a trailer park, set on the edge of a big lake. It was a nice one, electrical hookups, the kind of place most people leave their trailer or camper at year round, and visit in the summer, they all know each other, couple golf carts, you get the idea. A small little beach on the lake, couple of boat slips, and like a main clubhouse, with ping pong tables, etc. Cinderblock buildings, nothing special. But making money.

Family friend bought it, built a stage and seating, right on the property, maybe 1,000 outdoor seating. Has shows there all summer long, the residents get two tickets to each show, and they sell the rest to the public. Traveling cover bands, secondary country acts, etc.

Then he knocked down the dumpy clubhouse, and built a function hall, with a restaurant on top of it, with a big deck facing the lake. Got a bunch more boat slips.

Then, he bought an old Mississippi paddle wheeler, and docked it at the beach, right next to the outdoor concert venue.

Guy started with what was essentially a dumpy lakeside motel, now they have weddings, booze cruises, concerts, restaurant events, on and on. It's not even run that well, in my opinion, and they're killing it.

Indian Ranch | Live Music & Events | Webster, MA

Indian Ranch is Webster's premiere country music venue and entertainment resort! Indian Ranch is not just a concert, it's an experience!

indianranch.com

 

[Joe Bryant]

Thanks. What else have you seen that's profitable for the "ancillary"? I've not really thought of that angle but I can see how it would make sense.

Here's a fun one.

In my neck of the woods growing up, there was/is a trailer park, set on the edge of a big lake. It was a nice one, electrical hookups, the kind of place most people leave their trailer or camper at year round, and visit in the summer, they all know each other, couple golf carts, you get the idea. A small little beach on the lake, couple of boat slips, and like a main clubhouse, with ping pong tables, etc. Cinderblock buildings, nothing special. But making money.

Family friend bought it, built a stage and seating, right on the property, maybe 1,000 outdoor seating. Has shows there all summer long, the residents get two tickets to each show, and they sell the rest to the public. Traveling cover bands, secondary country acts, etc.

Then he knocked down the dumpy clubhouse, and built a function hall, with a restaurant on top of it, with a big deck facing the lake. Got a bunch more boat slips.

Then, he bought an old Mississippi paddle wheeler, and docked it at the beach, right next to the outdoor concert venue.

Guy started with what was essentially a dumpy lakeside motel, now they have weddings, booze cruises, concerts, restaurant events, on and on. It's not even run that well, in my opinion, and they're killing it.

Indian Ranch | Live Music & Events | Webster, MA

Indian Ranch is Webster's premiere country music venue and entertainment resort! Indian Ranch is not just a concert, it's an experience!

indianranch.com

That's awesome. Something fun like that and something that adds to the community would be fun.

 

[bigbottom]

The ancillary can be where the money is.

If you have a robust convention/meeting/ event business attached, the room income won't matter.

Thanks. What else have you seen that's profitable for the "ancillary"? I've not really thought of that angle but I can see how it would make sense.

Is it a thing where the room income is sort of a break even and you make your profit on the "other" things? Can you elaborate on what you've seen work well there beyond convention/meeting space?

In the luxury space, high end F&B, and revenue generating upgrades (e.g., cabana rentals) and experiences (wellness activities, cooking classes, wine/spirits tastings) significantly add to the bottom line.

 

[DA RAIDERS]

Location.

Interesting topic.

 

[Joe Bryant]

Location.

Thanks. Can you elaborate there? I know everyone always says location what specific things about location do you think are key?

 

[DA RAIDERS]

Location.

Thanks. Can you elaborate there? I know everyone always says location what specific things about location do you think are key?

there needs to be traffic or a reason to go where the hotel/BnB is located. I live in a very desirable place. But my house if turned into a hotel, wouldn’t make it. It would do OK in the short term rental market as is but would be empty 25-30% of the time.

Are you looking for business clientele, pass through travelers, vacationers? They all command a different location. There’s some overlap. But there’s usually a driving demographic.

 

[Joe Bryant]

Location.

Thanks. Can you elaborate there? I know everyone always says location what specific things about location do you think are key?

there needs to be traffic or a reason to go where the hotel/BnB is located. I live in a very desirable place. But my house if turned into a hotel, wouldn’t make it. It would do OK in the short term rental market as is but would be empty 25-30% of the time.

Are you looking for business clientele, pass through travelers, vacationers? They all command a different location. There’s some overlap. But there’s usually a driving demographic.

Thanks. That makes sense. At this point, it's just a dream idea. But I can see all that.

 

[Encyclopedia Brown]

I can picture Joe Bryant as a combination of Basil Fawlty and **** Loudon.

 

[Joe Bryant]

I can picture Joe Bryant as a combination of Basil Fawlty and **** Loudon.

I'd hope not. But good to know I guess.

 

[Joe Bryant]

Thanks. What else have you seen that's profitable for the "ancillary"? I've not really thought of that angle but I can see how it would make sense.

Here's a fun one.

In my neck of the woods growing up, there was/is a trailer park, set on the edge of a big lake. It was a nice one, electrical hookups, the kind of place most people leave their trailer or camper at year round, and visit in the summer, they all know each other, couple golf carts, you get the idea. A small little beach on the lake, couple of boat slips, and like a main clubhouse, with ping pong tables, etc. Cinderblock buildings, nothing special. But making money.

Family friend bought it, built a stage and seating, right on the property, maybe 1,000 outdoor seating. Has shows there all summer long, the residents get two tickets to each show, and they sell the rest to the public. Traveling cover bands, secondary country acts, etc.

Then he knocked down the dumpy clubhouse, and built a function hall, with a restaurant on top of it, with a big deck facing the lake. Got a bunch more boat slips.

Then, he bought an old Mississippi paddle wheeler, and docked it at the beach, right next to the outdoor concert venue.

Guy started with what was essentially a dumpy lakeside motel, now they have weddings, booze cruises, concerts, restaurant events, on and on. It's not even run that well, in my opinion, and they're killing it.

Indian Ranch | Live Music & Events | Webster, MA

Indian Ranch is Webster's premiere country music venue and entertainment resort! Indian Ranch is not just a concert, it's an experience!

indianranch.com

The idea of something way more than a hotel is a bigger idea than I'd been thinking. But I could see it being fun.

It's not a hotel, but the Shed BBQ in Ocean Springs does a goofy event / outdoor stage plus campground thing I always thought was fun. https://www.theshedbbq.com/

 

[TripItUp]

I worked for Starwood(W, Sheraton, Westin etc.) for 8 years before they sold to Marriot.

Starwood is largely credited for making hotel bars/restaurants a trendy location and it was a huge money maker for them. I agree with others that you need to find ancillary revenue streams.

The airbnb model disrupted and kinda crushed/disrupted the small hotels that don't differentiate from that experience and only offer rooms.

Also, owning the property and benefitting from the appreciation was a key part of Starwood's model. I'd definitely be strategic with lcoation. Also check if their are any local restrictions on AirBnBs etc...the more restrictions the better it is for the hotels.

 

[Joe Bryant]

I worked for Starwood(W, Sheraton, Westin etc.) for 8 years before they sold to Marriot.

Starwood is largely credited for making hotel bars/restaurants a trendy location and it was a huge money maker for them. I agree with others that you need to find ancillary revenue streams.

The airbnb model disrupted and kinda crushed the small hotels that don't differentiate from that experience and only offer rooms.

Also, owning the property and benefitting the appreciation was a kye part of Starwood's model. There is also a franchising model that had mixed results for Starwood.

That's helpful. Thanks.

 

[Joe Bryant]

I worked for Starwood(W, Sheraton, Westin etc.) for 8 years before they sold to Marriot.

Starwood is largely credited for making hotel bars/restaurants a trendy location and it was a huge money maker for them. I agree with others that you need to find ancillary revenue streams.

The airbnb model disrupted and kinda crushed the small hotels that don't differentiate from that experience and only offer rooms.

Also, owning the property and benefitting the appreciation was a kye part of Starwood's model. There is also a franchising model that had mixed results for Starwood.

For the bars/restaurant part of it, do you have a sense for how much of that business was from hotel guests vs outside people?

 

[TripItUp]

I worked for Starwood(W, Sheraton, Westin etc.) for 8 years before they sold to Marriot.

Starwood is largely credited for making hotel bars/restaurants a trendy location and it was a huge money maker for them. I agree with others that you need to find ancillary revenue streams.

The airbnb model disrupted and kinda crushed the small hotels that don't differentiate from that experience and only offer rooms.

Also, owning the property and benefitting the appreciation was a kye part of Starwood's model. There is also a franchising model that had mixed results for Starwood.

For the bars/restaurant part of it, do you have a sense for how much of that business was from hotel guests vs outside people?

It varied quite a bit. Anywhere from 25-100% of revenue was from guests. A hotel in a mountain town is more likely to be reliant on guests at the bar vs a hotel in NYC.

 

[FreeBaGeL]

Per Florida law and licensing I am technically a hotelier (I run an vacation rental management company, in Florida we get a hotel license to operate that business).

We do the whole theming thing, mostly around Disney. Example.

My next move I'm considering is buying a boutique hotel and renovating it to be more trendy. Not a big place, maybe 15-30 doors. A lot of vacation rental operators are moving in this direction to start severing ties with Airbnb who has turned heel on hosts.

 

[TripItUp]

My perfect hotel to invest in would be.

1) Hotel that has the potential for a desirable bar and restaurant scene that is boutique/unique but consistent with the region so it feels authentic.
2) Easy to get to for patrons not staying at the hotel
3) Other revenue streams opportunities like conference rooms/pool cabanas/wedding venues/travel agency)
4) Local restrictions on timeshare/vacation rentals (airbnb/vrbo etc.)
5) Close to or nearby nightlife/restaurant hubs...walkable area
6) Affordable local labor market
7) local events that support spikes in hotel stays (sports events/activities, concerts etc., summer tourism etc.)
8) Not a lot of other boutique/independent options that would make it easier for your property to standout
9) Affordable rent or mortgage

Obviously it would be difficult to find all of that, corporations have entire strategy teams that look for these sorts of things as their full time job.

 

[Joe Bryant]

Per Florida law and licensing I am technically a hotelier (I run an vacation rental management company, in Florida we get a hotel license to operate that business).

We do the whole theming thing, mostly around Disney. Example.

My next move I'm considering is buying a boutique hotel and renovating it to be more trendy. Not a big place, maybe 15-30 doors. A lot of vacation rental operators are moving in this direction to start severing ties with Airbnb who has turned heel on hosts.

Thanks. I can see something small to start being attractive.

Would you mind sharing some of the business metrics and rough idea on a basic plan? Or references on where to start / learn?

 

[Joe Bryant]

Obviously it would be difficult to find all of that, corporations have entire strategy teams that look for these sorts of things as their full time job.

Thanks. The last line is what makes me nervous. Seems kind of wild/arrogant to think a newbie like me could compete with pros doing this with lots of experience. I think I have a good understanding of hospitality but I've got zero real life business experience on this.

 

[TripItUp]

Thanks. The last line is what makes me nervous. Seems kind of wild/arrogant to think a newbie like me could compete with pros doing this with lots of experience. I think I have a good understanding of hospitality but I've got zero real life business experience on this.

Boutique is still cool. If you can find the right property and execute well you can crush it.

 

[bigbottom]

My perfect hotel to invest in would be.

1) Hotel that has the potential for a desirable bar and restaurant scene that is boutique/unique but consistent with the region so it feels authentic.
2) Easy to get to for patrons not staying at the hotel
3) Other revenue streams opportunities like conference rooms/pool cabanas/wedding venues/travel agency)
4) Local restrictions on timeshare/vacation rentals (airbnb/vrbo etc.)
5) Close to or nearby nightlife/restaurant hubs...walkable area
6) Affordable local labor market
7) local events that support spikes in hotel stays (sports events/activities, concerts etc., summer tourism etc.)
8) Not a lot of other boutique/independent options that would make it easier for your property to standout
9) Affordable rent or mortgage

Obviously it would be difficult to find all of that, corporations have entire strategy teams that look for these sorts of things as their full time job.

Great point about labor market. One of the major considerations with respect to location, is putting it in an area where you can attract affordable labor (meaning that there is also affordable housing within commuting distance).

 

[Joe Bryant]

Thanks. The last line is what makes me nervous. Seems kind of wild/arrogant to think a newbie like me could compete with pros doing this with lots of experience. I think I have a good understanding of hospitality but I've got zero real life business experience on this.

Boutique is still cool. If you can find the right property and execute well you can crush it.

This is a dumb question but could you elaborate on what makes a great boutique hotel? I think of boutique as a smaller property that's unique in some ways from the standard chain hotels. Even when they're often super nice.

 

[FreeBaGeL]

Per Florida law and licensing I am technically a hotelier (I run an vacation rental management company, in Florida we get a hotel license to operate that business).

We do the whole theming thing, mostly around Disney. Example.

My next move I'm considering is buying a boutique hotel and renovating it to be more trendy. Not a big place, maybe 15-30 doors. A lot of vacation rental operators are moving in this direction to start severing ties with Airbnb who has turned heel on hosts.

Thanks. I can see something small to start being attractive.

Would you mind sharing some of the business metrics and rough idea on a basic plan? Or references on where to start / learn?

The basic idea behind doing a boutique hotel is then you can sell or borrow against it based on cap rate.

As we currently operate, if we buy a house near Disney for $650k that currently does $60k in gross rents, put $100k into Disneyfying the property to bring gross rents up to $120k per year, that house is still only worth $650k. A cash investor MAY pay more for it, but likely not a lot more, and from the bank's perspective the house is residential so it's is still going to appraise for $650k which means that's the max mortage people can take on it, and I don't have any equity to borrow against.

Now take the same scenario where I buy a run down hotel/motel for $650k, put $100k into it (will probably cost more than that) and increase gross rents from $65k to $130k, and that's essentially going to double the value of the business since it is commercial property, meaning business loans will lend against $1.3M, and I can borrow against the equity of a $1.3M property to buy another one and repeat.

That is all way simplified, of course.

It terms of operations, the idea would be to essentially run it like 15 separate 1br Airbnb's. Each room unique, some theme to it, or at least high end trendy modern. Operations run more like a short term rental, so much more of a skeleton crew staff, only one person probably onsite full-time but handymen etc contracted out, not onsite full time staff.

For projections I would project more as a single room STR multiplied by number of rooms. That means sources like Airdna, STRInsights, etc for projecting gross revenue per room, rather than traditional hotels.

Probably down a totally different rabbit hole than what you're asking about, but another perspective.

 

[Joe Bryant]

Per Florida law and licensing I am technically a hotelier (I run an vacation rental management company, in Florida we get a hotel license to operate that business).

We do the whole theming thing, mostly around Disney. Example.

My next move I'm considering is buying a boutique hotel and renovating it to be more trendy. Not a big place, maybe 15-30 doors. A lot of vacation rental operators are moving in this direction to start severing ties with Airbnb who has turned heel on hosts.

Thanks. I can see something small to start being attractive.

Would you mind sharing some of the business metrics and rough idea on a basic plan? Or references on where to start / learn?

The basic idea behind doing a boutique hotel is then you can sell or borrow against it based on cap rate.

As we currently operate, if we buy a house near Disney for $650k that currently does $60k in gross rents, put $100k into Disneyfying the property to bring gross rents up to $120k per year, that house is still only worth $650k. A cash investor MAY pay more for it, but likely not a lot more, and from the bank's perspective the house is residential so it's is still going to appraise for $650k which means that's the max mortage people can take on it, and I don't have any equity to borrow against.

Now take the same scenario where I buy a run down hotel/motel for $650k, put $100k into it (will probably cost more than that) and increase gross rents from $65k to $130k, and that's essentially going to double the value of the business since it is commercial property, meaning business loans will lend against $1.3M, and I can borrow against the equity of a $1.3M property to buy another one and repeat.

That is all way simplified, of course.

It terms of operations, the idea would be to essentially run it like 15 separate 1br Airbnb's. Each room unique, some theme to it, or at least high end trendy modern. Operations run more like a short term rental, so much more of a skeleton crew staff, only one person probably onsite full-time but handymen etc contracted out, not onsite full time staff.

For projections I would project more as a single room STR multiplied by number of rooms. That means sources like Airdna, STRInsights, etc for projecting gross revenue per room, rather than traditional hotels.

Probably down a totally different rabbit hole than what you're asking about, but another perspective.

Thanks. That's super helpful.

 

[massraider]

The idea of something way more than a hotel is a bigger idea than I'd been thinking. But I could see it being fun.

What if a little local motor inn type place became the host for the Tennessee state pickleball tournament, or the Southern cornhole association?

Monthly food truck/horseshoe jamboree.

Give people a place to stay, next to whatever little niche thing is going on, can be a win.

And you schedule them during the dead time of year. That's the goal

 

[bigbottom]

Thanks. The last line is what makes me nervous. Seems kind of wild/arrogant to think a newbie like me could compete with pros doing this with lots of experience. I think I have a good understanding of hospitality but I've got zero real life business experience on this.

Boutique is still cool. If you can find the right property and execute well you can crush it.

This is a dumb question but could you elaborate on what makes a great boutique hotel? I think of boutique as a smaller property that's unique in some ways from the standard chain hotels. Even when they're often super nice.

Some descriptors of successful boutique hotels: unique, intimate, exclusive (or feels that way), authentic (not kitschy), character, and service at the highest levels.

 

[bigbottom]

Obviously it would be difficult to find all of that, corporations have entire strategy teams that look for these sorts of things as their full time job.

Thanks. The last line is what makes me nervous. Seems kind of wild/arrogant to think a newbie like me could compete with pros doing this with lots of experience. I think I have a good understanding of hospitality but I've got zero real life business experience on this.

The key is to do something in the market that isn’t being done. To fill a need that is not being met. Because if you’re trying to pull business from other more sophisticated hospitality operations, that will be an uphill battle. Not insurmountable, but more difficult.

 

[Bracie Smathers]

you schedule them during the dead time of year. That's the goal

This is the key.
Expect a 'dead time'.
Filling the 'dead time'. A hotel room has zero value if not filled so any break-even price during 'dead time' is the key. You need to keep your workers WORKING during 'dead time'. Keep em working, keep em happy, and share a bit of the bonus during peak season to keep the 'best workers'.
Worked at a remote ski hotel and during the 'dead time' we used to give deeeeep discounts to business travelers just to fill the rooms and cashed out at a disgusting clip during peak ski season. It got slow but we always had a steady base of business travel. During peak season they still kept a percent of rooms just for those business travelers in order to have them during 'dead time'.

 

[Instinctive]

Running a hotel is extremely low margin. There are two groups that typically make money.

1. The people who own the real estate
2. The brands that let you franchise

 

[Brunell4MVP]

Thanks. What else have you seen that's profitable for the "ancillary"? I've not really thought of that angle but I can see how it would make sense.

Here's a fun one.

In my neck of the woods growing up, there was/is a trailer park, set on the edge of a big lake. It was a nice one, electrical hookups, the kind of place most people leave their trailer or camper at year round, and visit in the summer, they all know each other, couple golf carts, you get the idea. A small little beach on the lake, couple of boat slips, and like a main clubhouse, with ping pong tables, etc. Cinderblock buildings, nothing special. But making money.

Family friend bought it, built a stage and seating, right on the property, maybe 1,000 outdoor seating. Has shows there all summer long, the residents get two tickets to each show, and they sell the rest to the public. Traveling cover bands, secondary country acts, etc.

Then he knocked down the dumpy clubhouse, and built a function hall, with a restaurant on top of it, with a big deck facing the lake. Got a bunch more boat slips.

Then, he bought an old Mississippi paddle wheeler, and docked it at the beach, right next to the outdoor concert venue.

Guy started with what was essentially a dumpy lakeside motel, now they have weddings, booze cruises, concerts, restaurant events, on and on. It's not even run that well, in my opinion, and they're killing it.

Indian Ranch | Live Music & Events | Webster, MA

Indian Ranch is Webster's premiere country music venue and entertainment resort! Indian Ranch is not just a concert, it's an experience!

indianranch.com

I think this was an Ozarks episode.

 

[Joe Bryant]

Running a hotel is extremely low margin. There are two groups that typically make money.

1. The people who own the real estate
2. The brands that let you franchise

Thanks. Would love if you could elaborate where you can. Thanks.

 

[Idiot Boxer]

My company owns three hotel properties.
One a Wyndham Grand Resort
One Sheraton Four Seasons Conference Center
One smaller local Holiday Inn

Covid was tough.

 

[Major]

Kind of hotel adjacent. I built a pseudo hotel business through Airbnb from 2015-2020. Now they have a fancy name for it (real estate arbitrage) but I rented and managed 30+ apartments in 3-4 complexes and then would sublease the units primarily on Airbnb usually to patients and students visiting the Medical Center here in Houston for long stays. I liked it because I didn't have to put much money down and was okay if they trashed the place because I was only renting. I sold it when Covid hit, bookings dropped and guests started getting ridiculously high maintenance with germ concerns but great margins while I was involved. Would usually net 35-40%. Now the space is much more saturated and the lore around AIrbnb has become a bit tarnished.

The hardest part was finding honest, hard working and consistent cleaners that you trusted to turn the apartments without handholding and double checking. I eventually hired someone else to manage this situation and any problems that would arise. The business pretty much ran itself once you properly trained all the employees so that was awesome as I was more focused on my creative endeavors.

 

[Instinctive]

Running a hotel is extremely low margin. There are two groups that typically make money.

1. The people who own the real estate
2. The brands that let you franchise

Thanks. Would love if you could elaborate where you can. Thanks.

It's a low margin business - fixed costs are somewhat high, you generally don't have very much pricing power, and your variable costs aren't exactly low. It's kind of like a restaurant - very thin margins.

Most hotels don't own the land, and most hotels are not even franchises, they're brand marketing deals. Take the Thompson Atlanta, for example. It won't be a Thompson in a few months. idk if it is moving to Hilton or something else, but it'll be out of the Hyatt portfolio. Hyatt never owned it, they just put a brand on it and take a cut - so the model for profitability for Hyatt is easy, but that hotel has to pay their Hyatt fees, cater to their loyalty program, but also run the hotel themselves. And chances are some commercial real estate firm actually owns the land and isn't exactly cutting you a good deal.

Your pricing power as a hotel puts you in a tough spot all the time. You really need to maximize it, because your only real revenue drivers are booking percentage and room rate - there's very little else driving revenue (some F&B, some spa, etc depending on hotel, but that stuff isn't driving profitability generally...it's often a breakeven attempt that is trying to drive up booking percentage). Because your costs are fairly fixed (and fairly high), you want as many rooms booked as possible.

But you don't always have price control and can't just drop the price to ensure you get booked. You have brand driven price controls sometimes. You have to provide rooms for points/free night credits and the brand only reimburses you some amount generally lower than you booking it for money. And if you drop your price dynamically, you run the risk of losing your pricing position / marketing power and you can't ever get that customer to pay the higher price.

Many hotels your goal is to target the more consistent business travel market, but that means you HAVE to be part of a major brand, AND you have to be tip top of ease and the location matters a lot.

It's generally a very competitive market, especially with AirBnB's growth, which puts further pressure on margins.







Running a hotel is very hard, and not very profitable. Owning the land and leasing it to a hotel, much easier and more profitable. Owning a powerful brand/booking platform where hotels kind of need to come to you and you largely control the most important hotel customer market...also much easier and more profitable.

 

[Uruk-Hai]

The hardest part was finding honest, hard working and consistent cleaners that you trusted to turn the apartments without handholding and double checking.

Find one and put them on retainer.

 

[Joe Bryant]

Running a hotel is extremely low margin. There are two groups that typically make money.

1. The people who own the real estate
2. The brands that let you franchise

Thanks. Would love if you could elaborate where you can. Thanks.

It's a low margin business - fixed costs are somewhat high, you generally don't have very much pricing power, and your variable costs aren't exactly low. It's kind of like a restaurant - very thin margins.

Most hotels don't own the land, and most hotels are not even franchises, they're brand marketing deals. Take the Thompson Atlanta, for example. It won't be a Thompson in a few months. idk if it is moving to Hilton or something else, but it'll be out of the Hyatt portfolio. Hyatt never owned it, they just put a brand on it and take a cut - so the model for profitability for Hyatt is easy, but that hotel has to pay their Hyatt fees, cater to their loyalty program, but also run the hotel themselves. And chances are some commercial real estate firm actually owns the land and isn't exactly cutting you a good deal.

Your pricing power as a hotel puts you in a tough spot all the time. You really need to maximize it, because your only real revenue drivers are booking percentage and room rate - there's very little else driving revenue (some F&B, some spa, etc depending on hotel, but that stuff isn't driving profitability generally...it's often a breakeven attempt that is trying to drive up booking percentage). Because your costs are fairly fixed (and fairly high), you want as many rooms booked as possible.

But you don't always have price control and can't just drop the price to ensure you get booked. You have brand driven price controls sometimes. You have to provide rooms for points/free night credits and the brand only reimburses you some amount generally lower than you booking it for money. And if you drop your price dynamically, you run the risk of losing your pricing position / marketing power and you can't ever get that customer to pay the higher price.

Many hotels your goal is to target the more consistent business travel market, but that means you HAVE to be part of a major brand, AND you have to be tip top of ease and the location matters a lot.

It's generally a very competitive market, especially with AirBnB's growth, which puts further pressure on margins.







Running a hotel is very hard, and not very profitable. Owning the land and leasing it to a hotel, much easier and more profitable. Owning a powerful brand/booking platform where hotels kind of need to come to you and you largely control the most important hotel customer market...also much easier and more profitable.

Thanks. I've always tried to own the buildings we run businesses from. That usually means starting small but I've never liked the idea of leasing. Granted, that might be impossilbe on some properties. But if one could own the land, does that change your thinking?

 

[Instinctive]

Running a hotel is extremely low margin. There are two groups that typically make money.

1. The people who own the real estate
2. The brands that let you franchise

Thanks. Would love if you could elaborate where you can. Thanks.

It's a low margin business - fixed costs are somewhat high, you generally don't have very much pricing power, and your variable costs aren't exactly low. It's kind of like a restaurant - very thin margins.

Most hotels don't own the land, and most hotels are not even franchises, they're brand marketing deals. Take the Thompson Atlanta, for example. It won't be a Thompson in a few months. idk if it is moving to Hilton or something else, but it'll be out of the Hyatt portfolio. Hyatt never owned it, they just put a brand on it and take a cut - so the model for profitability for Hyatt is easy, but that hotel has to pay their Hyatt fees, cater to their loyalty program, but also run the hotel themselves. And chances are some commercial real estate firm actually owns the land and isn't exactly cutting you a good deal.

Your pricing power as a hotel puts you in a tough spot all the time. You really need to maximize it, because your only real revenue drivers are booking percentage and room rate - there's very little else driving revenue (some F&B, some spa, etc depending on hotel, but that stuff isn't driving profitability generally...it's often a breakeven attempt that is trying to drive up booking percentage). Because your costs are fairly fixed (and fairly high), you want as many rooms booked as possible.

But you don't always have price control and can't just drop the price to ensure you get booked. You have brand driven price controls sometimes. You have to provide rooms for points/free night credits and the brand only reimburses you some amount generally lower than you booking it for money. And if you drop your price dynamically, you run the risk of losing your pricing position / marketing power and you can't ever get that customer to pay the higher price.

Many hotels your goal is to target the more consistent business travel market, but that means you HAVE to be part of a major brand, AND you have to be tip top of ease and the location matters a lot.

It's generally a very competitive market, especially with AirBnB's growth, which puts further pressure on margins.







Running a hotel is very hard, and not very profitable. Owning the land and leasing it to a hotel, much easier and more profitable. Owning a powerful brand/booking platform where hotels kind of need to come to you and you largely control the most important hotel customer market...also much easier and more profitable.

Thanks. I've always tried to own the buildings we run businesses from. That usually means starting small but I've never liked the idea of leasing. Granted, that might be impossilbe on some properties. But if one could own the land, does that change your thinking?

Well depending on the price you pay for the land, it could increase or decrease your margins, right? But if you own the land and it's a solid hotel spot, I'm not sure why I would want to operate the hotel. I'd rather, for a lot less work, let someone else take that risk. If I've got enough capital to grab commercial real estate at that level, I want my capital working for me, not me working to get capital.

 

[Zow]

I stayed at a Holiday Inn last night. What do you need to know?

 

[massraider]

Thanks. I've always tried to own the buildings we run businesses from. That usually means starting small but I've never liked the idea of leasing. Granted, that might be impossilbe on some properties. But if one could own the land, does that change your thinking?

I think it's two prongs:

Is there a fit in the market for what you wanna do, and can you get the right location for the right price.

If you guess right on the first, and can find the second, that's everything.

 

[Major]

The hardest part was finding honest, hard working and consistent cleaners that you trusted to turn the apartments without handholding and double checking.

Find one and put them on retainer.

I did that but needed others when things got busy. Seemed like we were always looking for cleaners we could trust to do a good job. It's easier said than done even though we were paying them above market. Some are lazy and don't like getting to all the nooks and crannies. Others just aren't reliable. There were times I would help clean to get the job done. We wanted our rooms to be in tip top shape and give a hotel feel not just a casual apartment cleaning. Nothing worse than a guest turning up to a subpar unit.

 

[massraider]

Thanks. What else have you seen that's profitable for the "ancillary"? I've not really thought of that angle but I can see how it would make sense.

Here's a fun one.

In my neck of the woods growing up, there was/is a trailer park, set on the edge of a big lake. It was a nice one, electrical hookups, the kind of place most people leave their trailer or camper at year round, and visit in the summer, they all know each other, couple golf carts, you get the idea. A small little beach on the lake, couple of boat slips, and like a main clubhouse, with ping pong tables, etc. Cinderblock buildings, nothing special. But making money.

Family friend bought it, built a stage and seating, right on the property, maybe 1,000 outdoor seating. Has shows there all summer long, the residents get two tickets to each show, and they sell the rest to the public. Traveling cover bands, secondary country acts, etc.

Then he knocked down the dumpy clubhouse, and built a function hall, with a restaurant on top of it, with a big deck facing the lake. Got a bunch more boat slips.

Then, he bought an old Mississippi paddle wheeler, and docked it at the beach, right next to the outdoor concert venue.

Guy started with what was essentially a dumpy lakeside motel, now they have weddings, booze cruises, concerts, restaurant events, on and on. It's not even run that well, in my opinion, and they're killing it.

Indian Ranch | Live Music & Events | Webster, MA

Indian Ranch is Webster's premiere country music venue and entertainment resort! Indian Ranch is not just a concert, it's an experience!

indianranch.com

I think this was an Ozarks episode.

Dude, you don't even know. The owner bought a house on the lake, in this rinky dink town, fell in love with it, and proceeded to build a museum celebrating the birth of the place. Literally built it cause he wanted school kids to take field trips there. Loses money, will never make money, he don't care. Renovating some old main st theater right now, cause he wants to go see a high school play there.

He's not a money launderer, but man, he'd be EXCELLENT at it