Buying Accommodation for Profit

Thursday, 19 July 2007, 9:48 am
Press Release: nzbizbuysell.co.nz

Buying Accommodation for Profit

Providing accommodation for a profit is a business that many of us have thought about and hundreds have followed through on. There is the attraction of working for yourself, working from home, meeting new people and generating an income as part of a lifestyle option.

Local and international tourism is a key earner for the New Zealand economy, and accommodation forms a key component of this. According to the Motel Association around 75% of Motel guests are New Zealanders. This, along with ongoing growth in tourism, helps cushion the detrimental impact of a higher New Zealand dollar. Consideration however should still be given to such issues as economic conditions, over supply and seasonal factors which can result in harder times as operators are driven to cut costs and compete on price.

Ask yourself whether you are passionate about good service, working in and providing a clean environment and enjoy working with people day in and day out. This last point is especially important as tourists can be demanding clients and what they demand above all else, is quality of service. Good accommodation operators understand and deliver to the needs and wants of their clients.

There are a number of ways to enter the accommodation-provider sector, including motels and motor lodges, tourist hotels, luxury lodges and boutique hotels, management rights, holiday parks, bed and breakfast accommodation and backpacker accommodation.

As in every business, it is all about the price you are prepared to invest. While owning the bricks and mortar (freehold), is attractive investment wise, it can represent a considerable financial burden. To be financially successful in your accommodation business it is important not to have huge borrowings, as these can quickly drag you down during lean times.

The accommodation industry offers the opportunity for lucrative add-ons like restaurants and bars. This can help diversify your income but will require additional staffing. Maintaining a balance needs consideration. Small business owners can easily end up overworked, doing everything from marketing and bookings, to cleaning and general maintenance.

When searching for an existing business, follow the basic rule of real estate and put ‘location’ at the top of your list of requirements.

See if the hotel or motel meets your basic criteria. Check out its financial statements for the most recent two or three years, gather information about the hotel’s physical facilities, market demand, surrounding area, competition etc. Once you have the necessary information, do your own estimate as to what the hotel’s operating returns will be for the next three to five years. Watch for expenses that are missing, or are unusually low or high and find out what is impacting them. Work out a staffing schedule, wage rates plus whatever premium you might pay to have better employees. Make sure the numbers work for you.

Expect to be exhausted in the first year as you learn and fine-tune your business. Find a good motel minder to allow you some free time. No business can survive if the owner is constantly tired or irritable.

It’s a wonderful life being your own boss and owning accommodation can be a very rewarding and fulfilling lifestyle option. It may be your way of making your bed so you can sleep at night. For more information on how to go about purchasing your ideal business, visit NZ Business for Sale website www.nzbizbuysell.co.nz

ENDS

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