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Latest News
Caravan Park Market Review - June 2010
The commencement of this year’s tourist season was again heavily dependant on the quality of the weather in the southern states compared to that in Queensland. In spite of a lengthy wet season, initial reports suggest that it has been an exceptional start to the 2010 season as Caravanners progressively make their way north.
Read more...Resort News Magazine - Issue June 2010
Most motel owner/operators/managers will tell you they are rarely in the onsite residence. Maybe this is why the motel residence is the most forgotten about, ignored, and neglected, part of many, many motel complexes. In “the good old days” motels were typically built with a lovely 3 or 4 bedroom home above or beside reception where the owner/operators (who were often the one’s having the motel built) were going to live with their children, and operate the motel business as a family concern. The motel was not only built as a place of business but also a home for the family to live and run the operation
Resort News Magazine - Issue November 2010
Monday, 12 July 2010 10:28
Net Profit Margin can be described as a measure of profitability or percentage of Income. Quite simply it is the percentage of profit remaining after all expenses/costs have been taken away from the income figure. Net Profit margins not only vary across different business types but different business within the same industry.
The main two variables that will directly influence the profit margin of a business are product prices and operating costs. In the case of a motel these include nightly tariff rates and the cost to rent a unit. The motel industry in general terms show profit margins of anywhere between 50% - 68% of Sales Revenue. This percentage depends on factors which make up the cost to rent a unit in that particular motel. These include but are not limited to the followin:-
- Age of the premises
- Type of constructions of the buildings
- Level of repair of the buildings and fittings
- Size and location/position of the site
- Availability and cost of labour
- Method of cleaning laundry
On top of the above factors the more efficient the motel operation the higher the profit margin that the motel will achieve. For example cleaners taking 40 minutes to clean a motel room when it could be cleaned in 20 minutes will blow out the employment expenses for a motel. This may result in double the wages required if the motel was being operated effiiciently. This will increase the total expenses required to operate the business and reduce the profit margin substantially.
Costs of Goods Sold can ruin a profit margin in any business, if one is paying too much for items such as food and beverages, the profit margin on the sale of those items will not be as high as it could be.
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Motel A |
Motel B |
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Average Nightly Tariff |
$110 |
$90 |
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Cost to Rent that Unit |
$35 |
$35 |
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Net Profit |
$75 |
$55 |
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Net Profit Margin as a Percentage of Income |
68% |
61% |
Different otels operate at different profit margins. The easiest example of this to consider is the difference between two motels that are showing the same Net Profit with one preparing food and beverage and the other without.
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Motel C – Accommodation Only |
Motel D – Accommodation & Food and Beverages |
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Income |
$480,000 |
$590,000 |
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Gross Profit |
$470,000 |
$540,000 |
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Operating Expenses |
$145,000 |
$215,000 |
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Net Profit |
$325,000 |
$325,000 |
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Net Profit Margin |
68% |
55% |
Different size motels will operate at only marginally different profit margins due to the variable costs being the largeset component of the total costs incurred. Fixed costs within a motel business relate to the smaller percentage of the total operating expenses, whether it is 20 units or 40 units in size. For example insurance and Property Rates are fixed costs that will not change no matter how many rooms are sold in a given year. The variable costs however will. For example bank charges, electricity, laundry costs, wages, cleaning, repairs. telelphone, etc will vary depending on the size of the motel and the number of rooms sold.
The net profit margin is a very useful tool if used correctly, particulary as an indicator of correct tariff structure and efficiency of motel operation.
Andrew Morgan
Motel Broker/ Director
Qld Tourism and Hospitality Brokers