According to a study by IBISWorld, the U.S. hotel and motel industry generated over $194 billion in revenue in 2023, with small motels contributing significantly to this figure.
While the allure of consistent revenue and property appreciation draws many into the motel business, the reality involves challenges like seasonal demand and operational costs.
In this article, we explore the pros and cons of running a motel, helping you determine if this business model aligns with your goals and financial plans.
Pros of Running a Motel Business
Running a motel offers multiple benefits for business owners. Here are some pros listed below.
1. Steady Income Stream
Motels can provide consistent revenue, especially in high-traffic locations.
Example: Highway motels or those near popular tourist attractions often maintain steady bookings year-round due to a consistent flow of travelers.
The nature of short-term stays offers regular turnover, which means you have the chance to maximize occupancy.
2. Flexible Management Options
You can choose to run the business yourself or hire management staff, giving you flexibility.
Example: Some owners prefer to be hands-on, while others hire experienced staff to manage day-to-day operations. This allows for more free time and can potentially make it a semi-passive investment.
3. Property Value Appreciation
With proper maintenance and smart upgrades, the value of the property can appreciate over time.
Example: Improving amenities, upgrading rooms, or adding a restaurant can increase property value and attract more customers, offering long-term financial growth.
4. Less Competition Than Hotels
Motels often face less competition compared to larger hotel chains, especially in niche markets.
Example: If you own a motel near a local attraction that caters to budget-conscious travelers, you may have fewer competitors targeting the same audience.
5. Simple Business Model
The motel business is relatively straightforward to run compared to more complex hotel businesses.
The focus is on basic services like room rentals and cleanliness, which makes it easier to manage with minimal experience.
Cons of Running a Motel Business
While there are many advantages, it’s important to consider the challenges of running a motel business. Let’s look at some of the cons.
1. Seasonal Fluctuations
Revenue can drop significantly during off-peak seasons, especially if your motel is in a tourist-heavy location.
Example: A coastal motel might see a drop in bookings during the winter months, leading to lower occupancy and reduced income during that period. You’ll need to plan for such fluctuations and manage cash flow carefully.
2. High Operational Costs
The day-to-day expenses of running a motel can add up quickly.
Maintenance Costs: Regular repairs and upkeep are necessary to keep rooms in good condition.
Utilities: Electricity, water, heating, and other utilities are ongoing expenses that eat into profits.
Staffing Costs: Depending on the size of your motel, you may need to hire front desk staff, housekeeping, and maintenance personnel.
These costs can significantly reduce the profitability of your motel, especially if you don’t have a high occupancy rate.
3. Location Dependency
The success of a motel heavily depends on its location.
Example: A motel located far from highways or major attractions might struggle to attract guests, making it more challenging to maintain profitability. This makes selecting the right location essential for long-term success.
4. Intensive Customer Service Requirements
Running a motel means constant interaction with guests, and customer service is key to maintaining good reviews and repeat business.
Example: A single bad review due to poor service or room quality can damage your reputation and affect future bookings. Managing customer expectations and delivering consistent quality is vital.
5. 24/7 Availability
The hospitality industry demands round-the-clock availability, which can be exhausting for hands-on owners.
Guests may arrive late at night, require assistance during their stay, or expect quick responses to issues. This can become a strain on owners who prefer more work-life balance.
Key Factors to Consider Before Starting a Motel Business
While the pros and cons give you a good overview, there are a few specific factors to think about before starting a motel.
1. Location
Location is one of the most critical factors in the motel business.
You should aim for areas with high traffic, whether it’s a tourist hotspot, near highways, or close to airports. Motels in areas with regular visitors will perform better than those in isolated locations.
2. Initial Investment & Financing
Starting or buying a motel requires a significant financial commitment.
Example: Depending on the size and location, motels can cost anywhere from a few hundred thousand to several million dollars. Additionally, financing options may vary, so it’s important to secure proper funding or partnerships.
3. Management Approach
Decide early on whether you will be managing the motel yourself or hiring a management team.
Self-management can help save costs but can be time-consuming and demanding. Hiring a professional team can relieve some of the workload but will also require a portion of your profits to cover salaries.
How to Maximize Success in the Motel Business
To maximize success in the motel business, focus on these given points.
1. Invest in Guest Experience
Offering clean, comfortable, and modern rooms can significantly improve guest satisfaction.
Example: Simple upgrades like high-speed Wi-Fi, flat-screen TVs, or complimentary breakfast can set you apart from competitors and encourage positive reviews.
2. Effective Marketing Strategies
Utilizing digital marketing and online platforms is essential for attracting guests.
Example: Listing your motel on online travel agencies (OTAs) like Booking.com or Expedia can increase visibility and bookings. Encouraging guests to leave positive reviews on sites like Google or TripAdvisor also helps build your online reputation.
3. Pricing Strategy
Stay competitive with your pricing, especially in areas with multiple lodging options.
Example: Offering discounts during the off-season or creating bundled packages (like a stay-and-dine offer) can help attract more guests during slower periods.
Conclusion: Is a Motel Business Right for You?
In summary, the motel business has the potential for steady income, flexibility, and growth.
However, it also comes with high operational costs, seasonality, and the demands of customer service.
To succeed, you need a solid location, an effective management plan, and a focus on delivering great guest experiences.
Whether this business is right for you depends on your goals, finances, and commitment to the hospitality industry.