Hotels for sale: Quality Inn, Sneads Ferry NC (No longer available)

Property offering

Listing broker: Jonathan Ruprai, Marcus and Millichap, via Loopnet
TripAdvisor reviews: Bubble score 4.0

Property website:

Quality Inn Sneads Ferry (Choice Hotels child site)

Asking price	$3,800,000	Given
Number of rooms	68	Given
Annual gross	$1,241,000.00	Calculated
Occupancy	58	Calculated
ADR	$85.00	Given
REVPAR	$50.00	Given
Room revenue multiplier	3.06	Calculated

The facility:

This facility was formerly a Holiday Inn Express.

Click for map

The market:

Even this property's negatives work in its favor.  This one is doing well even with a Quality Inn franchise, yet has some potential. It's in a beach resort area that has needed a hotel for a long time, but it's also near some demand generators so that you're not entirely dependent upon the beach resort.





The annoying thing about military towns is that it's hard to get people to pay much more than eighty bucks per night for a room in most of them, no matter how nice you fix up the hotel (which is close to the government per diem rate that those guys, or anyone who they bring into town, or anyone working for a government contractor, can be reimbursed by the government for). Even good, solid, Class A operations (the Hamptons, the Holiday Inn Expresses, the Courtyards), that rack a little higher rent a lot of their rooms at that government rate.  This could explain why this property is no longer a Holiday Inn Express -- why put up with IHG's Mickey Mouse crap if the most you're going to do is eighty bucks a night anyway, and you can do that with any franchise?

The property offers the best of both worlds, even if by themselves, either would be a sub-par world. In the wintertime, you get those Marines from the base and are assured of that eighty bucks a night even in the off-season; in the summer you can get the beach tourists for North Topsail and make some real bucks (currently $112 per night, even though North Topsail is not the best known beach resort in NC -- Wrightsville/Carolina Beach, Bogue Banks near Morehead City, and the Outer Banks are much more famous).

The Stone Bay area of Camp Lejeune, very close by (which didn't amount to much of anything other than the Camp Lejeune rifle range, until they built up all those other facilities and centralized a lot of specialized weapons training there), is all new. And you can catch some visitors to the Courthouse Bay area (where the Marines do amphibious vehicles), and Onslow Beach (Recon Marines, like you saw in the movie Heartbreak Ridge).

With a large, institutional demand generator like a Marine base, I'd identify and pursue government contractors, not Marines in general; although be nice, their money spends, too . . .

The physical location (area, surrounding neighborhood):

The property is out a ways from Jacksonville, where you'd have lots of downward rate pressure, and on the side of it pointed toward Wilmington -- which has a muscular business community, aggressive pursuit of growth, and a much healthier economy; although it's not close enough to Wilmington to get you any serious Wilmington business traffic. The downside of that: there aren't a lot of restaurants and other creature comforts close by.

Still, real estate speculators and anyone looking to maybe locate a plant in Jacksonville (where there's lots of cheap labor if you can put up with high turnover -- even jobs that would pay ten bucks an hour elsewhere pay only minimum wage there) might find appealing, particularly if it were more upscale.

Facility changes recommended:

The building needs a coat of paint. Whoever put that last one on had very questionable color taste.  I'd consider white, with green shutters . . .

Some TripAdvisor reviews indicate that a product refresh and some upgrades might be in order.

Market information links:

• North Topsail Beach, N. C. - Wikipedia
• Sneads Ferry, N. C. -- Wikipedia
• Camp Lejeune Marine Corps Base - Wikipedia

Operational changes recommended:

Both facility design and management, as Beechmont would approach it in this location, will reflect the need to reposition this property as a Class A mid-market property.

Housekeeping and guest relations can't be bad in a hotel that gets a 4.0 bubble score on TripAdvisor, but both need some attention.

Housekeeping isn't generally bad, but it could be tightened up a bit. Any hotel will have an occasional cockroach show up as a guest, but if it happens more than once -- even if only once a year for two years -- you need to have the exterminator come around more often.

We might want to make sure that the staff we have is guest responsive: anyone can make a one-time boo-boo, but TripAdvisor reviews indicate that we have too many recurring.

Many people come down for a trip to the beach. They're there to have a good time, and don't need problems. Occasionally, they stay there for social events like a wedding or a funeral. They're preoccupied with a major life event, and don't need problems. In either event, you don't want to show up as uncaring if there's a problem to be solved, and it's all the more important that you don't.

Positive relationships between employees and guests, even if they occur on a personal level (provided that they don't venture into specific, forbidden areas) need to be encouraged.

Marketing recommendations:

This property needs to be 'moved'. I wouldn't have it be Quality Inn Sneads Ferry, I'd have it be Red Lion North Topsail Beach (as you can see from the Loopnet listing compared to the TripAdvisor listing, someone already thought of that). The mailing address is Sneads Ferry (which is a nearby fishing village which may be some, but not much, help to us), but it's only a mile and a half from an ocean beach, and North Topsail Beach is going to be your most profitable demand generator.

Franchise options:

IF WE EXECUTE A HOTEL MANAGEMENT AGREEMENT WITH AN EVENTUAL BUYER, THAT AGREEMENT WILL PROVIDE THAT WE HAVE ACCESS TO ALL BUSINESS RECORDS OF THE PROPERTY PRIOR TO CLOSING. IF THESE INDICATE THAT THE FRANCHISE NOW IN PLACE IS WORKING AND IS BENEFITING THE PROPERTY, WE WILL GENERALLY ADVISE KEEPING IT, SUBJECT TO FIVE-YEAR TERMINATION OPTIONS.

WE DO NOT, HOWEVER, RECOMMEND MAINTAINING THE QUALITY INN FRANCHISE HERE.

As an alternative, we recommend conversion of this property to a Red Lion Inn and Suites. (We made the same recommendation for a nearby Jacksonville hotel, so if you see a Red Lion in Jacksonville, let's revisit it.)  It's not likely, without serious investment, that it'll ever be a Holiday Inn Express again, and there are no good franchise options for properties considered to have already had their run as a Class A property and have since been downscaled, but Red Lion has a bit of a track record of being able to redeem properties like that, anyway; and that will get better over time as they grow into this part of the country. Even the GuestHouse brand (which shouldn't have you investing so much into upgrades) can support it just as well as Quality Inn: any brand you have is going to require us to be on the stick with local marketing, without having it cost us quite the 8-12% of our revenue that we'd be forking over in order to keep it a Choice franchise; but I'd seriously consider splurging to make it a Red Lion Inn and Suites.

What I'd do is try to work a deal with Red Lion's advertising people to give up ten to fifteen room-nights each week during the summer, and allow them to make those rooms available for vacation package promotions which Red Lion could advertise around the Carolinas and Virginia; and let them pay for the advertising. This benefits Red Lion, by making the Red Lion name better known through this part of the country and stimulating franchise sales; and benefits us by making North Topsail a more well-known and in-demand tourist spot -- which in turn would put our rooms more in demand. Then we let the law of supply and demand do its power and magic. And be nice and make friends with the town of Topsail Beach (http://www.topsailbeach.org/ThingstoDo/tabid/90/ ), and help them plan events, and maybe chip in a few bucks or comp rooms, if they want to have a big fourth of July thing and promote it . . .

Why Red Lion?

Properties in the $5 million-and-under category that have Quality Inn and Days Inn and Baymont Inn franchises that are not really helping them, are generally without good franchise options.

It just happens that Red Lion has the flexibility needed to redeem properties like that, and do better by them moving forward. So, as Red Lion expands into the eastern United States, we end up recommending them quite frequently. Red Lion's flexibility in this area offers a tremendous opportunity for many properties up and down the East Coast that can be acquired for comparatively little, and following a renovation, have another twenty years or more worth of life left in them.

What does a Red Lion Inn and Suites look like?

We have no formal affiliation with Red Lion Hotels Corporation, and stand to receive no compensation or other consideration from the sale of their franchises.

Disclosures:

I lived in Jacksonville from 1980-1983 (I never served in the Marine Corps or any other branch of the military), and last visited the area in October, 2014.

Our recommendation:

Make an offer.

$50.00 REVPAR (revenue per available room) times 68 rooms, times 365 days a year, equals an annual gross of $1,241,000. At $85.00 ADR (average daily rate), they're renting 14,600 rooms per year, out of 24,820 room nights available (68 rooms times 365) . . . 58% occuapncy.

That's understandable -- it's isolated from the rest of the Jacksonville hotels, so you'll have some rooms go empty in the winter during the tourist off-season -- and not bad, but still a little low (I like to see something at least in the low 60's).

And it's been sitting on the market for the better part of last year.

So while the asking price of $3.8m (3.06 x GRR - this guy's had some help establishing a value for his property) is not unreasonable, I'd offer him something closer to $3.2mil and see what he does . . .

Food and beverage should be limited to the required continental breakfast.

Evaluation:

Value of property based on data given:	High	$3,600,000
(Our estimate)	Low	$3,200,000
Renovation required	Modest
Recommended budget	TBD

Who should buy this hotel?

This property isn't going to be a magical money maker, but its downside is limited and it has lots of potential to exploit for an aggressive operator with some marketing know-how.

Who should not buy this hotel?

Everybody thinks they're going to buy a hotel in or near Jacksonville and get rich off the Camp Lejeune marine base located next to it; and if that's all you want to do, you'll be competing with thirty other area hotels, many of them newer, and all of them thinking that they're going to do that successfully.

Likewise, everyone who builds near a beach is going to regard the beach as their meal ticket.

In either case, it's not going to work that way for the owners of this hotel. Large, institutional demand generators such as a military base require identification and targeted marketing of secondary users.
North Topsail Beach is going to require some marketing support of its own to compete successfully with more well-known beach resort area such as Wrightsville Beach, Bogue Banks, and Myrtle Beach for tourism dollars and warm bodies.

If you lack the inclination or the know-how to do the work involved, perhaps you should consider a different hotel.

Beechmont links

• Beechmont Hotels Corporation
• What Would Mike Do?: The hotel blog

About us

Beechmont Hotels Corporation is a hotel management company based in Winston-Salem, N. C. We frequently have occasion to perform asset identification services for potential clients who are seeking to acquire hotels, and inform them as to how a particular hotel listed for sale can best serve their investment needs -- or not.

After a time, we will republish the information here as a short feasibility study (unless an agreement with the potential client for whom we originally examined the property prohibits it).

Our evaluation is based on our own subjective opinion, using data collected from freely available sources online, unless otherwise noted in the Disclosures above. Our advice as shown here is as we would advise a client. You are free to accept or reject it, and should check behind us and make your own evaluation.

Ultimately, you are responsible for your own decisions, including whether to rely upon our opinion or to confirm our assessment for yourself, and we assume nor accept any liability.

When we choose -- ourselves -- a hotel offering to evaluate here, we choose only hotels that we have something nice to say about, a positive recommendation to make; hotels that we wouldn't mind signing to manage ourselves for twenty years.

When someone submits one to us, we're totally candid and spare no one's interests or feelings. If it's a bum deal, we'll simply tell you, don't touch it with a ten foot pole, and we don't care who gets mad.

If you are contemplating purchase of a hotel and would like for us to complete an evaluation similar to this for you for the hotel that you are considering, send a PayPal for $100 at makeitrain18018@gmail.com .

(It has to be a hotel that is currently listed for sale, that you can look up on Loopnet or a broker website. I will pass the information to you privately, and wait a few weeks before I republish it here, unless we make other arrangements in advance -- at a slight extra charge -- to keep it just between us.)

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