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Johanna Welty<br />Boutique Hospitality Broker, Consultant & Expert WitnessJohanna Welty
Boutique Hospitality Broker, Consultant & Expert Witness

(925) 708-4505 (Mobile)

California Boutique Hospitality Sales
PO Box 902
Alamo, CA 94507
925.708.4505

 

Exit Strategies

 

by

 

Johanna Welty, California Inn Sales Specialist

 

Increasingly, when speaking with aspiring Innkeepers or even with existing Inn owners who may be considering the sale of their current Inn in order to purchase yet another hospitality establishment, I find myself bringing up the crucial – cruel?-- topic of establishing an all-important “exit strategy” before finalizing any Inn purchase.  Formulating a well thought out “exit strategy” before taking the adventuresome and rewarding leap of purchasing an Inn is definitely worth serious discussion. 

Although I have been a Realtor since the late 1970s, I did take a few years break during the 1990s to serve as a Morgan Stanley Investment Advisor.  As a result, I now see all real estate as “investment “– even if it involves only residential property.  Traditionally, because a residence comprises the single greatest “investment” for most Americans, many aspiring Innkeepers see the sale of their longtime family home as providing, at least, part of the proceeds to help realize their dream of owning an Inn.  Even in our challenging, current market, Inn dreams continue to be fulfilled, in part, with proceeds derived from a residential sale.

Location!  Location! Location!  How often have we heard this dictum -- this ultimate rule that claims to determine real estate value?  As trite as it may sound, it is, in fact, LOCATION that ultimately determines an Inn’s chances of real growth and resale success.  I do not mean to underestimate the management and marketing skills so essential to operating a successful Inn but none of these human talents can ever override the death toll impact of a poor location.

 

There are many reasons to buy an Inn.  I myself could be tempted by a charming Victorian surrounded by lush ferns and an English rose garden.  But such temptations more reveal those qualities that I personally treasure for my own private residence.  In contrast, if I am seriously considering an Inn – a “business” that must grow its revenue as a result of attracting repeat guests --, then I must consider far more how LOCATION will serve to attract others -- guests -- so that my revenue can, and will, grow.  I no longer have the luxury to consider only what pleases me; instead, I must think in terms of what the world wants and what, indeed, will please the world.

 

Currently, I count as one of my clients an outstanding Innkeeper/owner who is brilliant with a highly analytical mind.  During one of her more human moments, she openly confessed how she erred when purchasing her Inn.  She saw it as a beautiful structure and was pleased that it was only an hour from the sea.  During her first year of ownership, she was dismayed that revenue was not what she expected it to be … but blamed it on the fact that it was her first year running an Inn.  By the end of her second year, she began to “see” that it really was the “sea” – just a mere hour away – that, indeed, was to blame for her lacklustre performance!  It finally became painfully apparent that it was the “sea” that was the real attraction – the DESTINATION LOCATION – the reason that so many travelers daily just “drove past” her beautiful Inn en route to the “sea.”

 

In the meantime, as a thoroughly responsible owner, she paid off her mortgage in record time.  Ironically, that otherwise noble effort simply left her with little more than a “title” to a building – that housed an inn without guests.  As a result, her business financials today reflect only this building – her “business” dream now can only be sold as a residence, one that, regrettably, is but “an hour from the sea.”

 

This may be an extreme story but, if an Inn is not situated in a location that offers attractions that draw guests, that particular Inn may be an unsound business investment.  I do not believe that, for Inns, the old “if you build it, they will come” saying applies.  An Inn can only thrive if it is surrounded by a greater DESTINATION LOCATION. 

 

Ideally, an Inn should be “supportive of” and convenient to good restaurants, theatre, wineries and wine tasting rooms; or it should be located along a majestic coast for exciting whale watching, surfing, sailing and romantic sunsets; or found nestled among the towering Redwoods where hiking trails and salmon fishing are both at its front door.  A ski resort is ideal because within that dramatic LOCATION an Inn can serve guests who already are there to ski – they are not there only because of the Inn.  Ideal inn locations can be historic districts/towns, such as mid-nineteenth century gold mining communities, where living museums, vintage auto shows, Victorian Christmas celebrations all compete with National Trust architectural treasures.  And, because the world loves golf, inns close to major golf courses will always attract high-end, international golf enthusiasts.  The world of hospitality today is global, a fact that ensures success for any inn that strives to satisfy international guest preferences.

 

Too, any location must be thoroughly evaluated in relation to its Chamber of Commerce.  If there is a vibrant and active, committed and responsive Chamber that continually sponsors a variety of events that attract visitors to the community, a well-managed Inn in that location has greater chances of thriving.

 

And, lest the reader assumes that the writer only believes in leisure destinations – wineries, historic gold mining towns, the Redwoods/National Parks, ski resorts, the coast, prime golfing venues --, effort must be made to highlight the supreme value of  “urban” Inns that in every city around the world so carefully cultivate and professionally cater to business travelers. 

 

“Business district” Inns count endless opportunities to serve “road warriors” and often document the highest occupancy rates of all!  Business district Inns are busy during weekdays with business travelers but can be full on weekends as well.  B&Bs located in cities near other businesses, including universities and  hospitals, usually gain “rock star hospitality status,” if both management and marketing are top notch.

 

One of the very best Inns that I have ever had the opportunity to enjoy is, in fact, located along the High Plains in Wyoming’s capital city of Cheyenne – definitely, a far cry from the coastal shores!  The astute Innkeeper/owner, Jim Osterfoss, is not one of my clients – I serve only California -- but, if I were an aspiring Innkeeper looking to purchase an outstanding business Inn/success story, I would have Jim Osterfoss and his Nagle Warren Mansion Bed & Breakfast at the very top of my list.  His is an “urban” Inn located in a Rocky Mountain capital city – an Inn that benefits from the year-round presence of state legislators, emerging wind energy entrepreneurs and Warren Air Force Base.  Beyond these obvious advantages, the Nagle Warren excels thanks to an Innkeeper who understands his “urban” location and how to grow an Inn business with the essential ingredient of Internet marketing.  His impressive website, www.naglewarrenmansion.com, should be “required study” for any aspiring Innkeeper anywhere – but particularly by aspiring “urban” Innkeepers.

 

During past stays, I have witnessed Jim’s Mansion hosting an impressive array of “Theme Getaway Weekends” and “Mystery Dinners” attended by fun-loving residents who happily drive from all over Wyoming as well as from next door Nebraska and Colorado – Denver is just a short distance to the south.  Fundamentally, The Nagle Warren capitalizes on regional “pent up R&R demand.”  The Nagle Warren meets this “local need” by hosting endless choices of delightfully romantic week-end getaways to Rocky Mountain residents far from coastal shores or year-round golf!

 

More importantly, Jim’s Nagle Warren has consistently targeted an international corporate community by providing meeting planners and business travelers with rooms equipped with high speed Internet access (with POP 300), 24-hour telephone call attendant and voice messaging, 24-hour business center with fax, copier and computer and an onsite Conference Center that can accommodate up to 30 people!  His comprehensive website devotes two pages purely to “Business and Conferences.”

 

In conclusion, when considering the purchase of an Inn, LOCATION should be key to any acquisition decision.  Most probably a day will come in the future when you will want to sell that same Inn.  If you have not selected an Inn that enjoys the many benefits offered by a true DESTINATION LOCATION – business or leisure --, you will have a far more difficult time building the all-important business financials that, in the end, attract the most qualified Inn buyers and satisfy their essential commercial lenders.

 

Johanna Welty, Inn Sales Specialist

Summer 2010

 

 

 

REALTOREqual Housing Opportunity
CalBRE Lic. # 01307696

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