Buying an Accommodation Business

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 meeting new people, working from home, working for yourself 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 working in and providing a clean environment, good service and whether you 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 wants and needs of their clients.

There are a number of ways to enter the accommodation-provider sector, including motels and motor lodges, backpacker accommodation, luxury lodges and boutique hotels, tourist hotels, holiday parks, management rights and bed and breakfast accommodation. Check out our Motels and Accommodation Businesses for Sale on nzbizbuysell.

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 bars and restaurants. 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 cleaning and general maintenance, to marketing and bookings.
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 motel or hotel 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 an accommodation business can be a very fulfilling and rewarding 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, check out our New Zealand Accommodation Businesses and Motels for sale on nzbizbuysell.