Valuing a Motel

Bruce Jenkins, CCIM, GRI, e-PRO

Dalton Wade Realty Group

813-843-7193

Valuing a Motel:

Collectively, the lodging business is worth more than $500 billion, and motels comprise a healthy portion of this by capturing the frugal traveler demographic. What this business venture lacks in glamour it makes up for in profitability.

Motels are up against many unique operational roadblocks that other lodging options don’t have to contend with. Chief among these challenges is providing customers with a hospitable stay on a shoestring budget.

Here are some Rules of Thumb for valuing Motels:

* 2.25-3,5 times annual sales, up to 5 times for resort properties

* 10-12.5 percent Cap Rate

* Location, age, structure, franchise or independent effect value

Limited service operating expenses - 50-65% of Gross Revenue

Questions to ask Seller:

Is there a "Punch List" (corrections/updates)
Any new highway or road closures nearby
Review any contracts with the Franchisor
Age of the equipment