Is Owning a Motel Profitable 2024?

Entrepreneurs looking to start a business in the hospitality industry might want to find out if owning a motel is profitable or if investing in a hotel is a better option.

No matter which option you choose, some of the key players in this industry are the location, management, and service you offer.

And if you are already confident about the afore-mentioned skills, then investment might be the only hindrance that you may or may not face.

So let us dive deep and find out the investment, profits, and other nitty-gritty of starting a motel business in the U.S. in 2024.

Is Owning a Motel Profitable

What is a Motel Business & how Does it Work?

A Motel is a type of accommodation business that is mainly catered for road trippers, traveling salespeople, or other passersby looking for overnight accommodation.

Motels work exactly like a hotel. However, the only difference is that the front doors of rooms face a parking lot and are not hidden behind a lobby or a reception desk.

Ideally located on the way to the destination rather than the destination itself, a Motel is a convenient and cost-effective alternative to a hotel.

Now that you have some idea of what a Motel is, let us dive deep and discuss the profitability of this business.


How Much Does It Cost To Start a Motel?

Obviously, the cost to start a Motel will vary greatly depending on the location, size of the property, and maintenance and operation costs, among other things. However, to give you an idea, here’s a table showing you the different costs associated with starting a Motel business:

Type of expenseAverage Cost
Land acquisition $50,000 – $250,000
Building construction$400,000 – $2,000,000
Fixtures & Equipment $25,000 – $50,000
Furnishings $25,000 – $50,000
License & Permits$5,000 – $25,000
Insurance$1,000 – $5,000
Signage & Advertising $5,000 – $25,000
Technology & IT Support$5,000 – $25,000
Legal & Accounting cost$2,000 – $20,000
Total $495,000 – $2,495,000

As you can see from the above-table, you will need an investment of $495,000 – $2,495,000 on average to build a Motel in the U.S. However, this amount can vary depending on different factors.


Is Owning a Motel Profitable?

Is Owning a Motel Profitable in 2024

Yes, owning a Motel business, just like any other business, can be profitable, provided that the occupancy rate of your Motel is more than 60%.

You can find out the occupancy rate of your hotel by dividing the number of occupied rooms by the total number of rooms in your Motel and multiplying it by 100.

Your Motel’s location, careful research, planning, and execution play a very important role in this.
You will need to find a Motel site or an established Motel business for sale that has the potential for growth and profit.

You will then need to develop a motel business plan with deep research and analysis. After the construction, you will have to ensure your Motel is clean and the service you offer is satisfactory for success.


How Much Does a Motel Owner Make?

Again, the income of a Motel owner largely depends on the location, size of the property, occupancy rate, number of staff members, operational cost, etc.

However, on average, the earnings of a Motel owner in the U.S. is $50,000 annually. But if your Motel has a high occupancy rate, then this amount can be as much as $100,000+.

Here’s the state-wise earnings of Motel owners in the U.S. as per ZipRecruiter:

State Annual Salary
Washington$69,444
Colorado$69,256
Delaware$64,759
Virginia$63,682
New York$63,200
Maryland$62,682
Vermont$61,857

Pros & Cons of Starting a Motel

Pros of Starting a Motel

  • Highly profitable
  • Value appreciation
  • Flexibility in management
  • You get to be your own boss

Cons of Starting a Motel

  • Operational challenges & cost
  • Income may vary by season
  • Taxes
  • High employee turnover
  • Risky

Factors to Consider When Starting a Motel

Factors to Consider When Starting a Motel

Here are some factors that you must consider when starting a Motel in 2024:

Location

The biggest factor that influences the profitability of a Motel business is its location. So make sure the property you choose to buy or rent out for your Motel has the right location.

A property near or on the way to a popular tourist destination is likely to see more customers.

You can also choose the location based on the type of guest you want to target. For example, a motel near a theme park will be better suited for families rather than solo travelers and so on.

Competition

The competition in the motel industry also plays an important role in determining the profitability of this business.

For example, you might have to adjust your pricing and compromise on profits if there are plenty of Motels around your location. Having competitive pricing and excellent service will help you in this situation immensely.

Market Demand

It is essential to understand the market demand for Motel in the location where you are hoping to start your business.

If your Motel is located in a touristy area or near a popular destination, then the demand for your business will be more, and that is the kind of area you should look for to build your Motel.


How To Start a Profitable Motel Business?

License & Permits Needed to Start a Motel Business

The need for licenses and permits will vary depending on the location of your Motel Business and the services you want to offer. However, here is a list of licenses and permits you might need to start a Motel business:

  • Business License
  • Building License
  • Food service License
  • Liquor License
  • Health inspection certificate
  • Fire inspection certificate
  • Sign Permit

Insurance Needed to Start a Motel Business

Having different kinds of insurance can save you from incurring unexpected expenses. And since the Motel business is already expensive, you must consider getting the following list of insurance:

  • General liability insurance
  • Business interuption insurance
  • Employee insurance
  • Worker’s compensation insurance
  • Fire/theft/damage insurance

What’s the Best Way to Buy a Motel?

What's the Best Way to Buy a Motel

Before you jump right into purchasing a property for a motel, it is worth considering the options available:

Leasehold Motel

If you do not have the substantial amount it takes to buy a motel or a property for a motel altogether, then you can consider leaseholding a motel.

In this, you simply rent the building and own the business. This option saves you from investing the lump-sum amount. However, you will have to pay rent to the property owner.

If you choose this option, then you can expect to make an investment of around $300,000.

Freehold Going Concern Motel

In this option, you get to own the business and the land.

Though this is an expensive option, you at least do not have to be bothered about leaseholds, or about someone being on your head all the time. You can choose to live on the property as well while taking care of your motel business.

Syndicate Partnership

Since motels make a lot of profits, banks are always happy to fund them.

So, you can choose to enter a syndicated partnership where you will not have to work full-time and will enjoy part of the profits the motel generates.

For this, though, you will have to employ a working manager while you become a silent partner.

Franchise

You can choose to invest in some of the best motel franchises if you want to take minimal risk in this expensive business.

By investing in a franchise, you can benefit from brand image, customer base, proven business model, and all kinds of support and help. 


What is Better Starting a Hotel or a Motel?

Starting a hotel can be slightly better than starting a motel. However, there is a very big difference between the investment figures of both ventures.

If you have a low capital and still want to enter the hospitality industry, then you should stick to a Motel, or you can even start a B&B.

However, if money is not an issue for you, then starting a hotel can be quite profitable.


How to Run a Profitable Motel Business?

How to Run a Profitable Motel Business

Here are some useful tips for you that will help you run a profitable motel business:

Go Online

This is the era of digitalization, and most people these days make a straight Google search to find nearby motels or hotels.

So, to make the most out of this business, make sure you list your business online on Google My Business and other online travel platforms.

Go an Extra Mile

Guests are more likely to appreciate a business that goes the extra mile to offer something that others don’t.

So, other than offering an excellent stay and service, guide your guest on the things they can see and do upon reaching their destination. Share a secret or hidden spot on the way, maybe.

Offer Reward Program

Guests are more likely to come back to your Motel if you offer them a reward program.

For this, you can ask your guest to recommend the property to friends and family via a code, and they can get a certain discount the next time they visit.

Be Flexible

Since Motels are usually needed by travelers, they may want to call it a day randomly during their journey.

So be flexible with check-in and check-out times to have an edge over the other motels around you.

Focus on Service

Your guests will not return to your Motel if your property is dirty and the service is poor when they are staying. So, make sure to prioritize cleanliness and maintenance for repeated business.


Starting a Motel Franchise Vs. Independent Motel

Since starting a motel involves such substantial investment and risk, you might want to find out what is better, buying a motel franchise or starting an independent motel.

Let us compare the two options based on different factors to find this out:

  • Brand Recognition: The biggest advantage of buying a motel franchise is that they have brand recognition and an existing customer base. So finding customers from day one won’t be a challenge for you. However, if you start an independent franchise, then you will have to do the groundwork of brand building, and you might even struggle to find customers at the start.
  • Fees & Royalties: When you buy a franchise, you are required to pay a set percentage of royalty and marketing fees that get deducted right from your profits. But when you are running an independent motel, all the net profit goes directly into your pocket.
  • Resources & Support: Franchisors offer support, training, and all the resources necessary to establish their motel successfully. However, when starting an independent motel, you are pretty much on your own.
  • Control: When you invest in a franchise, you are controlled by the franchisor and are supposed to follow the standards and rules set by them, which compromises flexibility. However, when you have your own motel, you are your own boss, and you can run your business the way you want.

So these are some of the key considerations that you can think about if you are stuck between investing in a motel franchise or an independent motel. 


Wrap Up

There is so much that goes into starting a motel business, from a substantial investment to customer experience and risk management.

So, before you get into this business, make sure you do in-depth research and come up with a solid business plan.

We hope the information we shared in this guide on Is Owning a Motel Profitable was useful to you.


FAQ’s

Is investing in a Motel worth it?

A Motel business can help you create a steady income and can also allow you to expand and scale your business. However, careful site selection and planning play a very important role in this business, and if you do it wrong, you can fail badly in this business.

What is The Profit Margin In a Motel Business?

The profit margin in a Motel business can vary based on your operating cost, maintenance cost, services you offer, etc. However, on average, you can expect to enjoy a profit margin of 10% to 12% from a Motel business.

What should I look for when investing in a Motel?

If you are buying an existing Motel or a property, then the key things to look for are the location, condition of the property, current management and staff, and the profit margins.

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