Hotel/Restaurant opportunities
I'm wondering if someone can shed some details on ballpark numbers/financials on a newly constructed 10-20 room hotel and possible restaurant in an area that is within walking distance to water ( across the street)  and is in an area that sees moderately good traffic 6 months out of the year. It's not completely desolate the other 6, but winter time is more ice fishing and snowmobile area. It's not necessarily a booming area, but is growing and in upstate NY.  I'm in talks with the owner to make this happen , my companies expertise is more development/sitework. Just looking to get ideas on avg cost to build, financials on the deal, how I could structure the deal. I'm not very versed in real estate , so things to specifically look out for or red flags. Appreciate any help, thanks.
[{"id": "fjlv1ti", "text": "Talk to a local GC? The stuff you\u2019re asking about is pretty market specific...", "replies": [{"id": "fjlzkpf", "text": "My first stop was going to be a local realtor, I know it's very market specific. I just thought someone may have something as simple as a spreadsheet with the basics, maybe some historical pricing or revenue projections. Profit expectations or length of time for investment recovery of the funds.", "replies": [{"id": "fjm5rd3", "text": "If you\u2019re looking for some type of hotel development pro forma that you can fill in with the market specific pricing then check out the development models at Adventures in Commercial Real Estate. I\u2019m pretty sure he\u2019s got a ground up Hotel development model on there. I don\u2019t know much about the hotel business, but I\u2019m sure there are resources that can help inform you. Check out sites like CBRE or LoopNet to find hotels that are for sale near you or in your state and you can see what their operating expenses are. Be careful though - ground up development is really complicated, so I would suggest you spend a lot of time understanding all the different assumptions, terms, projections, etc before purchasing land to develop.", "replies": [{"id": "fjn5qsd", "text": "Thank you for the response", "replies": [], "depth": 4}, {"id": "fkfzfn3", "text": "Personally, I like the hotel development models at http://tsmfinancialmodels.com better than the Adventures in CRE models.  The TSM models come with one hour of consultation where you can ask a bunch of questions and their models are institutional but still easy to use.", "replies": [], "depth": 4}], "depth": 3}, {"id": "fjpuy09", "text": "Honestly if it\u2019s your first hotel you should talk to an experienced fee management operator to get their thoughts and help on pro forms (or one of the myriad hospitality consulting firms) but overall as mentioned in my other post I really can\u2019t see a 20 unit hotel pencilling unless you\u2019re like doing a super luxury deal with some strong demand driver that isn\u2019t associated with the rooms (ie knock your socks off spa, Michelin Star restaurant, something along those lines).", "replies": [{"id": "fjrsh9f", "text": "Thanks for your input. It is somewhat waterfront, basically across the street with dock access. So it opens it up to boat traffic, which of course only helps during the summer. I liked the area because it is growing, it has restaurants around the area, nothing ground breaking, but room for improvement and in need of an upscale restaurant.  With the boat access, and having talked with the town planning board, they want to accommodate overnight stays for people out of town in something nice/upscale.  From your other post, I am trying to propose a deal to the owner of the property. They are not local, and I am part owner of a construction company, so we would be taking a role in the management of the construction, performing some of the construction, a local presence for them as well.  We have a great reputation in the area, we are close with the town, everyone wants this particular property to get developed into something commercial. I realize this all means nothing if the investments can't be recouped. The other possibility was building housing, which is still attractive, but not as much compared to a possible waterfront hotel stay with an upscale restaurant. I'm very close with the owners, so this isn't some shot in the dark, they just want viable options.", "replies": [{"id": "fjt1w3i", "text": "I\u2019d honestly look to do multifamily or condos in this instance. Your ADR is likely pretty low and you\u2019d have a short high season to make all of your money to carry you through the off season when you have high fixed costs still but no real revenue. If it\u2019s a vacation place going to a condo model might make more sense to the extent there\u2019s a market for it. Hotels really only start to work when you get scale above 100 keys unless you\u2019re doing like a super luxury product in a super luxury year round market like a Paris or Geneva. Smallest hotel I\u2019ve seen work was a 55 key hotel in Switzerland that was super $$$$$ and the only thing that kept them afloat was the fact that like a Saudi princess moved in permanently with 20 of her staff. If she ever blew out the place would be upside down. \n\nKeep in mind with hotels you have a base level of fixed staffing that you need to cover, and the variable staffing (ie housekeepers and porters) are pretty cheap. You still need to pay a GM like $75K to run a small place like that (and you also will have trouble staffing in a small market). Staffing right now is brutal in secondary and tertiary markets - the economy is too good to keep lower wage employees that are quality.", "replies": [{"id": "fjurs4o", "text": "Thank you, I appreciate all of your input. I had hoped I wasn't trying to talk myself into the grand visions of a resort hotel and 5 star restaurant and bar. But it appears that seems to be the case. Up till now the only plan has been condos, so this sounded new and a little more exciting, but not realistic. Thanks again", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fjpusus", "text": "A 20 u it hotel is too small to operate at any scale - you\u2019ll get cleaned out. The only way that works is if you\u2019re like retired and want to run a B&amp;B and the cash flows don\u2019t really matter. It\u2019s also going to be brutal trying to get something like that financed if you\u2019re a first time hotel owner with no experience (unless you have a ton of money that the bank will want you to keep liquid to put up a personal guaranty for). As it pertains to the restaurant, those tend to be loss leaders at hotels (unless you\u2019re in middle of nowhere and your restaurant is the only place for guests to get food). At 20 units your RevPAR is going to be way way to variable for an equity source to U/W. My $0.02 as an ex-hedge fund CRE hospitality specialist.", "replies": [], "depth": 1}]