- Posted By Andrew Morgan
There have been many changes to the way motels operate over the last 20 - 30 years, particularly regarding their income sources. Looking back, the food and beverage side of a motel business was an extremely busy and lucrative side of the motel package. At night, travellers for business purposes surrounded the bar whilst others dined alone or as part of a larger group, often entertaining their local clients. Families who travelled all day were glad to be out of the car and happy not to have go elsewhere to get the hungry kids fed. The motel owners ran the reception at the same time as waiting tables, all the time getting to know their customers and entertaining them from behind the bar while serving drinks. A full multi-tasking session, that occurred five or six nights a week.
That was then, and today we see a much different operation being more commonplace. One where the dining side of things is not as prevalent. Many have been closed and sit dormant, or have been transformed into alternative income producing areas, such as additional units or conference rooms. There are probably three main changes that have occurred over the years that may help to explain this.
- the employment requirements and behaviour of guests;
- increased food and beverage competition;
- the motel operator’s desire for more of a work/lifestyle balance.
The employment requirements and behaviour of motel guests has changed largely with technology. The increased mobility of people being able to work more effectively outside of the office environment means more opportunity to work from a motel room at night. Every work-related traveller has a portable office wherever they go. A mobile phone, tablet, or even a “bulky” laptop allows one 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. Guests can have a quick meal, then start working from their iPad back in their room as opposed to remaining in the restaurant through the night. This takes away from the social side of things where the traveller could meet new people in the restaurant or bar and stay on to network and socialise (in person). Technology today means everyone wants everything immediately, so getting back to the iPad and punching out those emails demanded by the customer now take priority.
In general terms there are far more dining options available today than there was 25 years ago. Large taverns, sporting clubs, speciality restaurants and fast-food options have exploded over recent years. In many towns often one can find half a dozen or more eateries within walking distance from their accommodation. This makes it extremely difficult for a motel to retain their guests to dine onsite, especially for extended stays. It is often not the case however in smaller towns, where dining options may be more limited. In areas with lower populations, the motel restaurants without that high level of competition, are often very strong food and beverage operations.
The third change that has occurred is that many motel operators have changed the way their businesses operate, by focusing on accommodation and moving away from the food service side of the industry. The higher profit margin from accommodation over food and beverage has been a catalyst for this change. Also, the added requirements of additional employees and the motel operator’s increased labour and involvement in the dining area, takes away from that desire for a better work and lifestyle balance. We have also witnessed a lower interest in the food and beverage side of the business by new incoming owner/operators. Many today consider motel operators and restaurant operators cannot be one in the same, requiring two very different skill sets, and that they may not be able to do both successfully.
The transforming of restaurants into additional motel units to increase 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 opportunity. An existing area under roof where the building’s exterior walls are not being moved, only the internal fit-out, offers less requirements from local Councils and therefore assists to reduce the capital outlay for such works. Obviously, the demand for accommodation will play a large role in additional units being a financially viable option in these cases.
There will however continue to be a strong demand for food and beverage operations within certain motel facilities, based on location, clientele base, larger corporate based motels, and others. The mix of accommodation, dining, and conferencing within the one facility does have its appeal for segments of the market.
Those looking to acquire a business of any kind do not buy unless they see some level of upside they can build upon. Motel buyers within the market are always looking for something that can offer added value, and the opportunity that an under-utilised area within a motel presents, such as a closed or non-profitable dining area, can be a great way to add value without a massive capital outlay. This makes a vacant area within the property (such as a former restaurant) a valuable asset to have.