Set on 88 acres of rolling hills, the Inn Above Onion Creek opened in Kyle, Texas, in 1995. Owners John and Janie Orr imagined the 12-room inn as a weekend retreat for residents of San Antonio and Dallas who wanted to explore the area's antique shops and wineries. Nearly every room has a fireplace and porch, and amenities include a pool and a spa.
The Orrs, who are selling the inn because of health concerns and a desire to slow down, have run the business at breakeven in recent years. An ideal buyer, they say, would have enough capital to expand the inn's facilities. Company events now account for about 20 percent of revenue, and if capacity were doubled, the inn could attract even more corporate business. This would boost occupancy, especially during midweek, says John Orr. "In my judgment, this business would work a lot better with 20 or 25 rooms," he says.
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$4.6 million, including 88 acres of land appraised at $2.6 million. The inn's facilities include five buildings and a separate owner's residence. The Orrs are willing to stay on in an advisory role for a limited time and may finance a small portion of the sale.
An inn of this size usually sells for four to six times gross revenue, says Peter Scherman of The B&B Team, a Scottsville, Virginia, brokerage -- and the value of the real estate is typically disregarded. In this case, hefty real estate costs are factored into the asking price.
Room rates average $245 per night and run as high as $475 for a private two-bedroom guesthouse. With that healthy pricing in place, gross revenue topped $539,000 last year, much higher than the average -- $366,000 -- for comparable businesses.
High labor costs help to explain the inn's struggles. Though the Orrs live on-site, they employ a full-time innkeeper to run a staff of 12. Consequently, payroll equals 47 percent of revenue. Wages are usually from 16 percent to 25 percent of revenue for inns of this size.
The area is scenic, and the property is big enough to allow for further development. To make money, a buyer should consider adding rooms to absorb the high overhead, reducing labor costs (perhaps by personally running the operation), or both.