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Dining In or Out?

Andrew Morgan - Monday, June 04, 2018

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

Opinions always differ about restaurants in motels, some love them some hate them, everyone has their own idea.  Times and attitudes have changed a lot in this regard from 20 years ago, even 10 years ago for that matter.  All the way back to 1995, I recall the motel owner/operator stayed up serving behind the bar in the restaurant until late into the night, with all the reps mingling and having a good time.  They were then up early the next day cooking bacon and eggs to complete a list of breaky orders.  It was a long day, but the financial benefits were great.  Today however the food and beverage industry and the dining requirements and work behaviours of guests have changed.  In addition, the major changes in technology over time has given every work-related traveller a portable office wherever they go.  A phone, tablet, or laptop allows the ability to be just as productive outside the office as in, thereby changing the way travel, accommodation, dining, and evenings are spent whilst away from home.
Back in 2012 when I last wrote about food and beverage within the motel industry changing, in house dining within some areas of the industry was diminishing slowly but I noted it was gaining momentum.  Well, since then the number of restaurants within motels has reducing substantially as well as the simple meals to rooms as well.  Many restaurants have either been closed, are sitting dormant or have been remodelled into additional motel rooms, or larger residences for families and lifestyle reasons.
Over the last 5 years or so things have continued to change even more rapidly.  Many have changed the way their businesses operate by focusing on accommodation and moving away from the food service side of the industry.  There are many reasons for this some of which include: -

1. The lower profit margin the food and beverage side of the business offers in comparison to the accommodation side of the business
2. The added requirements of additional employees and the operators increased amount of labour and involvement in the dining area
3. A lower interest in the food and beverage area by new incoming owners/operators who would rather remodel the restaurant area into more rentable motel units
4. Increased competition from other faster and cheaper dining options available
5. The proximity to other dining options
6. Advances in technology as mentioned, which has impacted several different ways

The refurbishment of restaurant and dining areas within motels into increased numbers of rentable motel rooms is growing.  An existing area under roof that is not being utilised to its fullest extent that can produce a strong income and profit offers excellent value adding opportunities.  An existing area under roof where the exterior walls are not being moved, only the internal fit-out offers less requirements from local Councils and therefore helps reduce the capital outlays for such works.

There will however always be a strong demand for food and beverage within larger corporate based motel operations.  The mix of accommodation, dining, and conferencing in the one locality is only going to continue to grow with the demands for training and conferencing growing within most industries.  This may require the industry to change and grow with the rapidly changing requirements of the market where everything is demanded to be within a finger-tip’s reach and supplied without delay.

Locality is also a driving force in the decision making in whether in house dining is viable for the motel’s future.  In areas where there are few dining options for guests, the value of the restaurant to the business may not be in question.  Often it is then a very viable business in its own right.  In locations where other dining options surround a motel, the question becomes more relevant.

Many buyers looking to acquire a motel are looking for something that can offer added value.  The opportunity that an under-utilised area within a motel offers such as closed or non-profitable dining area, can be a great way to add value without expending costs that make building expansion works prohibitive.