Pacific Rim Business Brokers Pty Limited

9.  Improving a Motel 

External Presentation

When a potential guest drives into a town he usually has a fair idea of the type of motel in which he wishes to stay.  He may be on a tight budget, and will only look at one or two star properties.  He may be in the middle range and will look at three star properties, or he may be willing to pay more to stay in a four or 4½ star motel.  If there are three or four properties in his tariff range he will probably drive past all of them before making up his mind.  So the first rule for improving a motel is improve the external presentation.  A well painted three star motel with lush gardens and a tariff of $100 will always attract more guests than a poorly presented three star motel with an $80 tariff.  Potential guests will not always choose the cheapest accommodation.  They often feel that if the motel is charging more, it is offering more.

Reception Area

Once the guest enters the motel he will begin to think about whether or not the external presentation matches the internal presentation.  Therefore it is important to have a well presented reception area.   If the reception area is dingy, untidy, and filled with unhappy motel staff the potential guest will assume his room will be a reflection of the reception area.

Guest Room 

Once the guest reaches his room he is fairly unlikely to turn back, and the motelier has secured the guest for the night.  However, if the guest’s room does not live up to expectations the motelier will never see that guest again.  In most businesses the best customer is the repeat customer.  It is the same in the motel industry.  A one off guest might be worth $100, but a repeat guest might be worth 2, 3, 5 or 10 times that amount over a year.


To keep a guest it is therefore essential to have guest rooms that offer a superior presentation, a better quality of furnishings etc.  Small things such as noisy refrigerators, air conditioners that are hard to operate, faulty televisions, dripping taps etc will annoy guests.  If a guest does not tell the motelier about these problems they may never be fixed.  Therefore it is a good idea to have a guest feedback sheet in each room.  A guest who cannot be bothered telling a motelier to his face that his property is a disgrace may be willing to note defects on an anonymous form.


You should consider ways to improve the motel on your first inspection.  If a motel with overgrown gardens, peeling paint, a dull reception area and dingy rooms is running at 40% occupancy think about the occupancy rate you could achieve with a little money invested in repairs and maintenance and a little time devoted to improvements.  When you inspect a motel for sale you should note your first impressions, list defects, calculate the cost of making improvements and the anticipated profit benefits.


Most motel guests use the Internet to find accommodation.  Therefore, a well presented website is as important as a well presented motel.  Your website should have photographs taken by a professional photographer, an easy to use booking engine, and will be more successful if it publishes the motel’s tariffs.


A motel that does not have a website and is not linked to the main booking engines such as and is missing out on a substantial quantity of business.

Weddings and Conferences

If you have a conference centre in the motel then promoting weddings and conferences will improve your bottom line.  Catering for these functions is relatively easy because you have set menus, a prepaid number of guests and therefore no wastage.

Coach Companies

Many moteliers have improved their businesses by contacting coach companies and offering dinner, bed and breakfast at group rates.  Coach groups also have the advantages of set menus, prepaid guests and repeat business.


Motels and other businesses benefit from good record keeping.  If you record your occupancy rates, average tariffs, revenue from each section of your businesses and all costs then you will always know how your motel is performing and whether it is necessary to make any changes.  You will also find it much easier when, in the future, you decide to sell your motel.

List of Potential Improvements

Many new moteliers tend to get overwhelmed by the day to day running of their business and forget the need to improve the performance of their motel.  So the last piece of advice on how to improve a motel is don’t forget to improve the motel.  Keep a list of improvements close to hand, add to them and implement them.

Upgrade the Motel

We have seen how higher star ratings produce higher occupancy rates and higher tariffs.  Let us now look at the calculations a motelier might make when deciding whether or not to upgrade.


Suppose the motelier is running a 3 star property that has occupancy rates and tariffs that are the NSW country average – 49.2% and $113.74.  The motelier assesses the demand for quality accommodation in town, the competition and feedback from his guests, and decides to spend $15,000 per room that will result in an upgrade from 3 to 4 stars.

If the upgrade yields country average results, each 4 star rooms should produce an occupancy rate of 61.1% and a tariff of $160.93.

Assuming the motelier owns a 25 room property, the results of his upgrade should be as follows.

Before Upgrade
Rooms Available 25
Occupancy Rate 49.20%
Rooms Occupied 4,490
Average Tariff $113.74
Accommodation Revenue $510,636
Cost of Room Service per Room $25.00
Total Cost of Service $112,238
Gross Profit $398,398
After Upgrade
Rooms Available 25
Occupancy Rate 61.10%
Rooms Occupied 5,575
Average Tariff $160.93
Accommodation Revenue 8$97,245
Cost of Room Service per Room $25.00
Total Cost of Service $139,384
Gross Profit $757,861
Gross Profit Increase $359,462
Gross Profit Increase % 90.2%
Cost of Upgrade per Room $15,000
Total Cost of Upgrade $375,000
Return on Investment 95.9%

His return on a cash investment of $15,000 per room is 95.9%.  There are very few other businesses that can produce similar figures.