A STUDY OF THE NAFURE OF THE GWNEfiHlP’ AND MANACEEMENT 0F SELECTEE} MFG-{EGAN MOTELS Thests for Hm Degree 0? DH. D. MICHIGAN STATE UNWERSITY Douglas C. Keister 1965 THESIS LIBRARY Michigan State University IHlllllllHHIIHHUIHIHUIll!lllHHIHIUIIHI||||H|1|| 1 3 1293 10457 8533 This is to certify that the thesis entitled A STUDY OF THE NATURE OF THE OWNERSHIP AND MANAGEMENT OF SEIEC TED MICHIGAN MOTELS presented by Douglas C. Keister has been accepted towards fulfillment I of the requirements for i Ph. D. degree in Business Administration /\ /:4 / ’ fl "”"_ {'7’71/1/34 /f{ LI!“ ’1']: 11“ t_.¢ Major professor irf Date January 269 1965 i i 0-169 i. ”flirt-"r ABSTRACT A STUDY OF THE NATURE OF THE OWNERSHIP AND MANAGEMENT OF SELECTED MICHIGAN MOTELS By Douglas C. Keister Purposes of the Study The main purposes of this study were to find out what activities the owner/managers of the selected motels performed in the areas of management, accounting, finance, and marketing; to learn whether their motels were or were not affiliated and the implications of this, to identify the owners in terms of their previous background; and to find out what the owners or managers considered to be their major problems in motel operation, Procedures m- Methods, Techniques, Data Used Although it was the intention to study motels twenty units or larger in size, this is actually a study of eightyneight motels fifteen units and larger. Eighty" two of the eightyueight are twenty units and largero Information was gathered through the use of two separate questionnaires, The first questionnaire was mailed to each of the two hundred eightynfour motels in Michigan officially listed in available motel directories as being twenty units or larger in size, Sixtyweight replied. Six of the sixtymeight, although officially listed as twenty units or larger, were less than twenty Douglas C. Keister units in size. The replies of all sixtyneight were tabu- lated and used in the study. The second questionnaire was employed in personal in- terviews conducted at thirty Michigan motels twenty units or larger. The information obtained through the thirty interview questionnaires was also tabulated and utilized in this study. Since ten motels took part in both the mailed and the interview phases, a total of eighty—eight Michigan motels were studied. The smallest motel in the study had fifteen units; the largest had one hundred eighty—eight units; the median motel size was twentymeight units. The Findings of the Study The major findings of this study were as follows: 1. The owners of the Michigan motels studied were for the most part men who had had business experience bee fore they entered the motel field. This business experie*ue varied and included, among others, ownership of dry cleaning establishments, grocery stores, construction companies, or hotels. Others had worked for business firms, usually in a sales or managerial capacity. The motel owners who participated in this study made the major decisions con- cerning their motels. 2. Where hired professional managers were employed, their primary duties were to handle the daily operating problems of the motels and to promote good guest relations. Douglas C. Keister The manager's role in maintaining good guest relations was very important. Hired managers were not, in general, in- formed as to accounting and financial matters of the motels which employed them. 3. The owners had invested in Michigan motels be” cause they expected an abovemaverage return on their inw vestment. Only twentymfive out of the total of eighty- eight stated that they had mortgage debt of over sixty per cent of total investment. Of the total investment in the motel, fifty per cent was the median for equity invest~ ment. A. The owner/managers felt that guests were attracted to motels by road signs, by the metelis good reputation which had been confirmed by its own satisfied guests, and by referral through national motel organizations. "Word~of»mouth" advertising conducted by satisfied clienteie was considered by the motel men studied to be the was: vital form of advertising possible for their motelsr 5. Owners and managers stated that commercial travelers (those who travel for business reasons) were the main and most important clientele for the Michigan mOtels studied. The success or failure of most of the motels studied de- pended largely, according to the owner/managers, upon how effectively the motels could attract these commercial tram velers. Commercial travelers are, the owner/managers in 1 this study stated, of particular importance to their motel r o from September to May, when few tourists are traveling. Douglas C. Keister 6. Most owner/managers did not use commercial rates, and some disapproved of them. They felt commercial rates would be unfair to their repeat guests who were not com- mercial travelers. They preferred to try to give the best service and accommodations possible for the undifferentiated prices paid by all guests. 7. Affiliation appears to be more beneficial for the large motel than the small. According to the owner/managers, affiliate members benefit from a nationallymknown and adu vertised name, and from use of large referral and reserva- tions systems which help achieve occupancy. Large motels can more readily absorb the cost of affiliation than the small motels, which in many cases could not afford it. 8. Problems of motel operation mentioned most often by the owner/managers were: securing and retaining enough competent employees for the wages they felt they were able to pay; safeguarding the reputation of the motel; and physiw cal maintenance and upkeep of the motel property to keep it competitive. 9. The sample size of eighty-eight constituted 30.9 per cent of the total population size of two hundred eighty-four. Possible bias of sample must therefore be considered in this study. The most likely possible bias, in the opinion of the writer, would be that the respondents may tend to be among the better educated and more progres- sive owner/managers. There appears to be no evidence, Douglas C. Keister roweverx (if.any importarnsliias. Binge the~1ru1>mnation was sipplied by the owner/managers, there is the possibility of inaccuracy in their reports. No evidence of major inn accuracies came to light in the thirty personal interviews, however. A STUDY OF THE NATURE OF THE OWNERSHIP AND MANAGEMENT OF SELECTED MICHTGAN MOTELS BY Douglas C. Keister A THESTF Submitted to MiChigar State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Management 1965 "For I, who hold sage Homer 8 rule the best, Welcome the coming, speed the going guest." Alexander Pope ACKNOWLEDGMENTS The writer wishes to express his sincere apprecia- tion to his dissertation committee, Dr. Rollin H. Simonds, Chairman, and Dr. Stuart B. Mead and Dr. Richard F. Gonzalez, members, for their cooperation and help, for their generosity with their time, and for their encouragement. Sincere thanks are expressed to Mr. Henry 0. Barbour, present Director of the School of Hotel, Restaurant and Institutional Management at Michigan State University, and to Dr. Joseph W. Thompson, past Director of the School of Hotel, Restaurant and Institutional Management, Michigan State University, for their encouragement and financial aid during the course of this study. Appreciation is also ex- pressed for funds received from the late H. William Klare, President of the Institute of Applied Hotel Economics. Special appreciation is also acknowledged here for the help received from all Michigan motel men who cooperated in the various phases of this study. These men gave generously of their time to make this study possible. My thanks to my wife, Billie, for all of her encourage» ment and for the many hours she spent typing this manuscript. And a special thank you to Lisa, age six, and Todd, age three, who helped Dad by trying to play quietly while this study was being written. ii TABLE OF CONTENTS Page ACKNOWLEDGMENTS ........ . .............................. ii Chapter I. PURPOSESOOOOOOOOOOO000000000000000000 00000 1 II. HISTORY AND PRESENT STATUS OF THE MOTEL INDUSTRY .................. 5 III. PROCEDURES ................................ 20 IV. BACKGROUND INFORMATION ABOUT THE MICHIGAN MOTELS STUDIED.............°°° 25 V. MANAGEMENT............ ............. .. ...... 38 VI. ACCOUNTING AND FINANCE ...... ......... ...... 82 VII. MARKETING...................... ............ 131 VIII. AFFILIATION... .......... .......... ...... .... IUB IX. MAJOR PROBLEMS IN OWNERSHIP AND MANAGEMENT OF MOTELS STUDIED ....... .... 164 X. CONCLUSIONS AND SUMMARY ............... .... 176 BIBLIOGRAPHY ............... .o... ....................... 194 APPENDIX......................o........ ........ ....... 200 iii CHAPTER I PURPOSES The purposes of this study were to analyze the sew lected Michigan motels in the following areas. Management The study analyzes the owner/manager’s background, his general education, his previous motel ownership or managerial experience if any, and his general qualifica~ tions for entry into motel management. What managerial activities the-owner/manager actually performs are ana— lyzed. Accounting and Finance The reasons why the owner chose motel investment are investigated. Motel investment is expensive. One motel room may cost $8,000, $l0,00C, $12,000, or more to install. The smaller motels in this study may have cost from $160,000 to $200,000 or more to build. The study determines where the motel owner obtained the funds, and why, among other possible investments which must have been available to him, he selected to invest in a motel. l Another purpose was to find out if he is satisfied with his investment. Also in the areas of accounting and financial manage- ment, this study attempts to learn: 1. Who holds the motel's mortgage. 2. What is the rate of occupancy. 3. What are the rates of depreciation. 4. Which methods of depreciation are used. Marketing .Methods used to attract guests are studied. Tech- niques of sales promotion and advertising, and methods by which the owner/managers study and plan for their mar- ket, are analyzed. Affiliation The recent growth of motel franchising has been little less than phenomenal. Less than ten years ago, many of the major motel chains of today were non—existent or were Just getting started. Today there are affiliation groups (active either as chains, as franchises, or as re— ferral groups) throughout the United States. These chains, franchises and referral groups are present in Michigan. A purpose was to study the effects of affiliation and franchising on the motel operations studied. Major Problems in Ownership and Management of'MoteIs Studied It was a purpose of the study to find out what prob- lems the owner/managers themselves cite as most trouble- some in their operation of their motels. A comparative analysis of the operational phases singled out by them as important areas of difficulty should give added insight into the nature of the ownership and management of the selected Michigan motels. A Final Purpose Broad studies have been made of motels and gen- eral motel management on a nationwide scale, but no study has previously been undertaken to investigate the motels of Michigan explicitly. To date, very few books have been published which deal only with the subject of motels. The books pri- marily concern two phases of the field: 1) motels in general, and 2) facts which the motel owner/manager should know and consider when building, buying, or operating a motel. These books outline the procedures which should be followed in motel ownership and management and indi- cate methods which motel owners and/or managers ought to undertake. It is hoped that the present study may be of use because of its specific investigation of the techniques and ideas actually practiced today by the se- lected Michigan motel owner/managers. CHAPTER II HISTORY AND PRESENT STATUS OF THE MOTEL INDUSTRY The First Inns The beginnings of the story of mankind are lost in the antiquity of the ages. Extremely ancient artifacts of humanity, however, have been found all over the world. Through the study of these, anthropologists inform us that manis early ancestors were travelers. They were nomads who followed the migrations of the game which was their food. After enormous reaches of time in human history, mankind did change from basically nomadic to basically sedentary habits. Man planted crops, domesticated aniw mals for food sources and to work for him, and built permanently-located societies. The men who settled and worked in one area were not entirely self-sufficient, as they are not today. Some men traveled then, as they do today, from one settled area to another selling the various goods needed by the local inhabitants. These men were a small-scale counterpart of today’s traveling 5 commercial men and salesmen. Along the trade routes of these early salesmen, to accommodate them, were located the first inns. It is known that the ancient Romans had post houses for couriers and officers traveling from the field to Rome.1 The inn and its innkeeper played a part in the writings of medieval England. In Chaucer's Canterbury Tales, pilgrims travel the English roads to visit a shrine. Some of the travelers in the story are presented in a fes- tive manner which calls to mind today‘s tourist on a holi- day trip. Inns have always been located in positions accesw sible to where the traveling was taking place. They de~ veloped near the waterfront for use by the common sailor. Wherever man consistently moved from place to place along the dominant modes of travel of the day, inns were estab~ lished and run by innkeepers. The English inn was the example followed in this country when inns were founded here. The English inn provided a few rooms for guests and offered, for a fee, food and lodging for a man and his transportation -~ his horse. As roads developed in England, inns were located 1Donald E. Lundberg, Inside Innkeeping (Dubuque: William C. Brown Company, 1956), p.fu. along the major highways to provide protection for the traveler from the elements and from notorious highway thieves, robbers and brigands. Several centuries ago, one who traveled along the English highways after dark was in- viting robbery and death. Unfortunately, the traveler could not always be assured of protection by the inns where he lodged. In those days, an innkeeper himself might conceivably, in some cases, be a thief practically of the order of the highway robber. Even in 1964, unhap- pily, there are still some travelers who would associate the word "innkeeper“ with highway robbery. With time, new methods of transportation came in to being, gained popularity, and were later discarded for better, faster, or more comfortable means. Each major transportation changeover created a commensurate evolu- tion in the inns which catered to the traveler. Today's expanded travel industry has adapted itself to today's modes of transportation. When ships were the primary method of travel, major inns were located near the waterfront. As roads developed, in England and then later in America, the pattern held true. It was first the traveler on horseback and later those who Journeyed by carriage to whom the inns catered. Later the carriage was modified and mounted on rails. Thus, and especially in this country, the inn -- or, as it had come to be known, the hotel -- was located near the railroad. In the United States, the railroad was a primary travel method from the 1870's through the 1920's. For that reason, the major hotels of that day (some of which are still standing) were built in locations convenient to the railroads. Today the railroad has been replaced by the automobile as the major method of traveling across the United States. The automobile is now, to a limited extent, being replaced by the airplane. True to the his- torical facts of travel -- from as far back as the days of the medieval peddlers, back to the pre-Christian trade routes, and back beyond that to earlier reaches of human history -- the situation remains constant that as a means of travel develops, a means of housing the traveler also develops necessarily and simultaneously. During the last century, hotels were located near railroads and in or very near to the heart of the busi- neSs district of a community. Hotels seldom made arrange- ments for the sheltering of a manis carriage. Man’s "carriage" today is his automobile. Today the man who travels in his car wants accommodations for the night where he can find comfortable rest and refreshment, and where his transportation -- his car -- can be located near his door. This need was the reason for the development of today's modern motel. The motel and its particular characteristics are a relatively new phase in the centuries-old story of innkeeping and lodging. Modern Motels -- Beginnings and Development The first motel was actually a cottage camp and was built in 1901 at Douglas, Arizona. This first motel was named Askins Cottage Camp. "The cottages were rented on an overnight basis to numerous families who had no other accommodations."l Other "motels" appeared in the United States. The first of these were elemental and uncomplicated, and probably uncomfortable. They were tents mounted on wooden platforms. Since the beginnings of motels origi- nated in areas of comparatively warm climate -~ southwest Arizona and California -~ tents were probably satisfactory for a good part of the year. In other parts of the country, public parks or various individual entrepreneurs provided camping grounds where travelers pitched their own tents. These camps were near the main roads. Usually the camp was a small plot of land with a pump in the middle. Outhouses were provided.1 The traveler often paid as much as $1.00 per night to have the dubious pleasure of camping out in one lIbid., p. 133. 10 of these earliest "tourist courts." Hotels were found in the business areas of towns and cities. Camp grounds were established between towns -- and on the outskirts of towns —- to accommodate travelers who could not afford hotels or who stopped where no hotels were available. The camping areas were often the only accommodations for those who traveled long distances by road.1 The tents on platforms were succeeded by long frame buildings separated into a few plain, unfinished rooms which provided a bare electric light bulb hanging from the ceiling, a lumpy mattress, an orange crate, and a wash basin. These were later replaced by individual buildings. The plumbing was moved indoors and a great innovation was upon the American scene -- "modern cabins." These modern cabins (probably from one to ten of them at a "motel") were located along the highways. Often they were built behind filling stations and frequently in an undesirable environmental setting. ' The first motel recognizable as such by today's definitionis generally accepted to have been the Milestone Mo-Tel, built at San Luis ObiSpo, California, in 1926. For years the term of designation was spelled mo-tel, which has given way to the present word motel.2 lIbid , p. 13A. 2Ibid. 11 The Modern Motel From such inauspicious beginnings, the motel in- dustry has expanded and evolved. Today it is an impor- tant economic entity in the American economy. As the motels began to develop, they were usually built, owned and operated by one man and his family. The husband rented the rooms, mowed the grass and did the maintenance work. His wife cleaned the rooms and made the beds. This type of motel Operation was nicknamed a "ma and pa" motel. This nickname is widely used by the motel industry today for the same type of operation. These are today still a very prevalent and important part of the total motel in- dustry in the United States. The vast majority of motels today are still less than twenty units in size and are owned and operated by one man and his family. In the past few years there has been another evo- lution in the travel industry which caters to the travel— ing man and to the vacationing, touring family. This evolution has produced the motor hotel. Motels provided minimum services at minimum costs, and without the tip— ping associated with staying at a major hotel. A tra- veler might Spend up to an extra twenty per cent of his room rent in tips when staying at a hotel. The first motels were very careful to deliberately not provide ser- vices for which the guest might be expected to tip. But l2 gradually a few motel operators decided to add extra ser- vices such as restaurants, telephone service, swimming pools, and bellmen. These services involved tips for the personnel who provided these extra services -- mainly the waitresses and the bellmen. These motor hotels, with their added services and added tipping expenses, soon be- came popular and the first to fill with customers, while the plain, minimum-service type of motel still had its vacancy sign lighted. The addition to the motel of luxury services which had formerly been the exclusive province of the hotel resulted in the birth of today's modern, large luxury motor hotels. Today, according to at least one source on the sub- ject, a motor hotel is a unit with forty rooms or more.1 At present, however, the variations in types, sizes and services of motels make conclusive definition of any of the terms -- motel, motor hotel, motor lodge, inns, etc. ~- difficult. It would be almost impossible to state defi- nitively what particularly characterizes a motel. There are motels, motor hotels, Holiday Inns, and Charter Houses- There are also Hilton Inns and Howard Johnson Motor Lodges. All of these cater predominantly to the A 1Roger Sonnabend, Your Future in Hotel Management (New York: Richards Rosen Press, Inc., 1964), p. lé9i 13 individual traveling by automobile. This variety is fur- ther complicated by Specialized airport motels, which cater to airline travelers. Today's ultra-swift jour- neying made possible by the jet aircraft has given rise to further inn specialization in the form of airport motels geared for the accommodating of those who travel at today's jet speeds. As transportation changes, so does the accommodations industry. It is estimated that there are over sixty thou— sand motels in the United States today as compared with twenty-nine thousand hotels. It is also estimated that the motels receive approximately forty per cent of the nation's combined hotel-motel room business.1 Five thousand of these motels, usually fifty rooms or larger in size, are believed to account for over half of the total motel business.2 The development of the motel industry occurred predominantly from 1948 to the present time. This de- velopment involved two major factors. The first was lRalph‘Dellevie, "Modern Motelkeeping: Part 2; Tips on How to Operate," Tourist Court Journal, (Feb., 1964), p. 65. 2Seymour Freedgood, "The Real Estate Markets -- The Hotels: Time to Stop and Rest," The Mortgage Banker, (Deco: 1963): p. 29. 14 that since 1948 approximately six hundred and six thousand rooms have been added to the motel-hotel industry. Most of these new rooms have been constructed by motels. Com- paratively few hotels have been built since World War II. The number of rooms sold each day in 1962 was only seven- teen thousand more than the number sold each day in 1948. This means that the motels have, to some extent, grown at the expense of hotels. Motels have derived the vast majority of their occupancy from individuals who formerly stayed at hotels. The flourishing business of the motels caused them to increase in number. The second condition is that total travel patterns have changed drastically in the United States since 1948. People travel more often by faster means and for shorter stays than ever before.1 The great and widespread in- crease in travel has created a need for modern motel ac~ commodations. There has been much talk of overbuilding in the hotel-motel industry. "Most of the clamor about overbuilding comes from the owners of older hotels who are the prin- cipal victims of the boom and are ill-equipped tc- cope with it. Last year only two thousand three hundred of the United States' twenty-nine 1"Motel Boom Matures; Rooms, Revenues Gain," Hotel—Motel Management Review, (July, 1963), p. 19. 15 thousand hotels met the minimum standards of comfort, maintenance, service and decercy re- quired by the American Automobile Association. "1 Despite the uproar about overbuilding, the motel in- dustry continues to expand. The motel buSlness is a large business in the United States and in Michigan. It is es- timated that there are over three thousand motels lo- cated in the state of Michigan. The cost of motels in the United States varies. During this study, one Michigan motel Operator inter» viewed noted: "During the 1930's I built and equipped six modern cabins for a total cost of $2,5000. That was when I entered what today we would call the ‘motel business.’ At that time you just said, ’I have cabins to rent.‘" Today's modern motel room can cost from $5,000 to $15,000. A typical breakdown would be as follows: Cost for a Single Motel Room Land ...................... $ '7I'T _ Building .................. 8,083 Swimming pool ......... .---- 145 Furniture and fixtures....__§___18’42 Total ..................... $11,166 The preceding illustrates the potential cost in— volved in today's modern motel. The motel has enjoyed 1Seymour Freedgood, loc. cit., p. 31. 2George 0. Podd and John D. Lesure, Planning and Operating Motels and Motor Hotels (New York: Ahrens Book Company, Inc., 1964), p. 16. l6 tremendous growth throughout the United States during past years because of its original low cost, the compara~ tive ease of entry into the motel business, and the de- mand for accommodations and services. To some extent, the "ma and pa" motels of the 1940’s and early 19509s are being replaced by modern motels and motor hotels ~~ particularly near major cities. For years the hotels feuded with the motels. Hotels looked down on motels as their "poor relations" and many hOtelmen either joked about motels or ignored them. During the 1950's, however, the hotels awakened to the fact that guests were staying in motels. If they wanted to stay in the nation‘s rooming business, the hotels realized, they had better get into the motel business. As a result we now find old-time hotel chains such as Albert Pick, Hilton Hotels, the Sheraton Corporation, and the Hotel Corporation of America in the motel business. There are also the newly formed motel chains, such as Holiday Inns and Ramada Inns. The modern motels being built today often have one hundred rooms or more. Some call them horizontal hotels- They provide complete services for their guests and may include restaurant, bar, swimming pool, golf putting greens, continental breakfasts and/or other manifestations of luxurious surroundings and ornate hospitality. 17 There has also been a change in the location of motels. Originally the place to locate the motel was along the highway where it could cater to tourists. Dur- ing the past decade this situation has evolved to some ex~ tent._ Many motels are today located in downtown areas and at exits of interstate highway systems. Now, more than ever before, the environmental surroundings are very im- portant to the motel. In the past, motels were often constructed in undesirable surroundings, and they some» times catered to individuals "undesirable" by today's standards. Today's investment requires that the motel .be located in carefully selected surroundings which will be conducive to the motelis success and to its estab- lishment of a respectable reputation. The modern motel is also often an affiliated motel. This is especially true of large motels fifty rooms or more in size. Some owners have found that it is best for their motels to unite in specific, controlled ways for the mutual benefit of all within the association. Today there are motel chains (those which are centrally owned), such as the gigantic Holiday Inns chain. There are franchise motels (those licensed for a fee), such as Howard Johnson Motor Lodges. There are affiliation groups, such as Best Western, Superior Motels, and Master Hosts, which unite for advertising, referral, and l8 operational standards. There are also extensive and in- clusive travel guide books published by travel recom- mending groups such as the American Automobile Association (AAA) and Mobilgas. Their listings advise the traveler of motels where they recommend that he take lodgings. Their recommendation is based on compliance by motels with their standards. The chain, the franchise and the affiliation all set standards which must be met by their member motels. Each affiliation, chain, or franchise (excluding the Mobilgas and the AAA, which are recommending agencies) is an organization which has united for mutual advertising. They all have referral systems which make it possible for the guest to make advance reservations for his subm sequent stop at another motel. The referral policy has played an important part in the growth of *ne motel 1n~ dustry during the past ten years. The growth of large motels using a referral system has often been at the ex~ pense of the hotels or of the smaller "ma and pa" motels. In the beginning of motels, the ownerwmanager was one man and he was there at his motel providing hospitality for his guests. Today he is being replaced to some extent by big business methods and by the hired. professional manager. 19 It is estimated that there are now over three thousand motels in Michigan. Motels are a part of the accommodations services offered to tourists and to people who are in the state on business. Tourism is the second largest business in the state of Michigan, and it consists of the multitude of facilities which cater -to the traveling public. A major factor, of course, in the travel service industry, or tourism, is providing sleeping accommodations for the traveler. Thus motels play an important role in the tourism economy of Michigan. Motels also provide a place of employment for inn dividuals in communities where jobs are scarce. They provide areas of investment and monetary returns for in» dividuals. In addition, it is estimated that $.90 out of every $1.00 received by a motel or hotel stays within the community where the motel or hotel is locater. For every dollar a guest Spends in a motel or hotel, he usually spends two to three additional dollars in the community. The above demonstrates the importance of the motel in the overall economy of the Unied States and of Michigan. CHAPTER III PROCEDURES For this study, eighty—eight motels from fifteen to one hundred eighty—eight rooms in size were selected and analyzed by the following methods. Size of Motels Studied Twenty units was selected as the desired minimum size. Six motels less than twenty units were, however, included; Despite the original intention to include motels twenty units and larger, this study actually does concern mOtels fifteen units and larger. Eighty-two of the eighty-eight are twenty units or larger in size. Selecting the Motels Every available directory of Michigan motels was checked to obtain names and addresses of each motel in Michigan officially listed as twenty units or larger in size. A total of two hundred eighty-four motels resulted. The directories included: 1. Michigan Accommodations Guide, published ~by the Michigan Tourist Council. 2. West Michigan Tourist Guide. 20 21 East Michigan Tourist Guide. Howard Johnson motels listed in Michigan. Imperial 400 motels listed in Michigan. Quality Courts listed in Michigan. Holiday Inns listed in Michigan. CDNQUl-ll'w Great Lakes American Automobile Association ,Recommended Guide List. 9. Mobil Oil Company Guide Book. 10. The Michigan Motel Association listing of Michigan motels. (Lists 2,400 motels.) 11. Duncan Hines Recommended Motels. The Mailed Questionnaire Questionnaires were mailed twice to each of the two hundred eighty-four. A total of sixty—eight usable questionnaires were returnedand the information they yielded was used. A letter was attached to each question~ naire explaining the study and guaranteeing complete anonymity to the motel men who responded. A copy of this letter and of the mailed questionnaire appear in the Appendix of this study. The Interview Questionnaire Seventy-five requests for interviews were mailed to motels selected from the two hundred eighty-four. These seventy-five were chosen by use of the 22 "Random Table of Normal Numbers" from Introduction to Statistical Analysis.1 Only motels located in the lower half of the Lower Peninsula of Michigan were retained. Thirty affirmative reaponses were received and thirty in— terviews were completed. The information was used in the study. For compiling the interview information a questionm naire was used as a guideline for asking questions of either the owner or the manager of each motel in the sample. A copy of the interview questionnaire and the letter requesting the interview appear in the Appendix of this study. Limitations of the Study The eightymeight motels studied constitute approxim mately three per cent of the approximate total of three thousand motels in Michigan and thirtyaone per cent of the two hundred eightymfour motels contacted. In terms of research validity, these are comparatively small per~ centages. Potential bias of findings must therefore be considered. Bias must also be considered in the possibility that the motel men who did agree to participate in this lWilfrid J. Dixon and Frank J. Massey, Jr., Introduction to Statistical Analysis (2d ed.; New York: McGraw-Hill Book Company, Inc., 1957), p. 460. 23 study may have been above average in several ways -- in- cluding their training and interest in motel work. Bias or misinterpretation of answers by the writer must also be kept in mind as a possibility, as well as possible incorrect answers by the motel men. Duplication Ten of the eighty-eight motels took part in both the mailed and the interview phases of this study. This increases the possibility of bias in the study despite the fact that greater depth of answer was possible during interviews, and questions asked during interviews were in many instances different from questions asked in the mailed questionnaire. Presentation For some questions (identical in mailed and intern view questionnaires) in Chapter IV, responses are pre- sented in termsof the total eighty—eight motels. In the rest of the study, answers to the mailed questionnaire are presented in terms of sixty—eight motels and answers to the interview questionnaire in terms of thirty. The presentation method (which will be used as con~ sistently as the nature of the variation and type of in— formation permits) in the following study consists of: 24 l- A statement of mailed questionnaire question and tabulated responses. 2. A statement of the corresponding interview _ uestionnaire question and tabulated responses- if the question were asked on both question- naires). 3. A presentation of the owner/managers' comments and ideas (not identified for purposes of as- suring the privacy and protection of the indi- vidual motel operators involved). 4. Comments by the writer for-purposes of explana- tion, analysis and comparative conclusions. If the third and fourth categories listed above are at times presented in a combined faShion, comments from the men interviewed will be denoted as anonymous quota-‘ tions from owner/managers. In instances where only the mailed questionnaire responses or only the interview responses are explicated, duplication of the question involved did not occur. For some questions, responses will total more than eighty-eight because more than one answer was indicated by the respondent. Where the respondent declined to answer or indicated that he did not know the answer to a question, replies have been respectively tabulated as "blank" or "not sure." "Both owner/manager" indicates that the reply was given by an individual who is both owner and manager, or that the problem involved is solved jointly by the owner and his manager. CHAPTER IV BACKGROUND INFORMATION ABOUT THE MICHIGAN MOTELS STUDIED The following basic information concerning all eighty-eight motels studied was obtained through the mailed and interview questionnaires. These fundamental facts will serve as a foundation upon which the study will be presented. Question 3. Mailed responses. (68)1 Total number of rooms. Low... ........................ 15 High .......................... 179 Median ........................ 23 Number of Number of Motels Rooms 41... .......................... 20-49 21 ............................. 50 and more 6...... ....................... 15-19 Question 1. Interview responses. (30)2 Total number of rooms. Low... ........................ 20 High....... ................... 188 Median.. ......... - ............. 55 1Refers to question number three on the mailed questionnaire. Sixty-eight respondents. 2Refers to question number one on the interview questionnaire. Thirty respondents. 25 26 Number of Number of Motels Rooms 16.. ........................... 50 and more 14 ............................. 20-49 Total motels studied. (88)1 Total number of rooms. Low. ........... . .............. 15 High .......................... 188 Median ............. . .......... 28 Number of Number of Motels Rooms 51 ........ .... ................. 20-49 31 ............................. 50 and more 6... .......................... 15-19 Question 6. Mailed responses. (68) Services offered. Swimming pool .................. 25 Restaurant ..................... 22 Other. ......................... 14 Bar... ......................... 8 (Other: tennis courts, putting greens, free coffee, boat dockage, continental breakfast, picnic grounds, conference room, private beach.) Question 3. Interview responses. (30) Services offered. Swimming pool .................. 19 Restaurant. .................... 17 Other.. ........................ 16 Bar................. ........... 7 Tap room... ............ . .. l lTen duplications omitted. 27 (Restaurant: 9 owned, 3 leased, 5 next door.) Other: 4 conference room, 4 coffee in room, 3 kennels, 3 direct dial telephones, 1 putting greens, 1 free car wash.) Total motels studied. (88) Services offered. . Swimming pool .................. 36 Restaurant ..................... 32 Other.... ........ . ...... . ...... 26 Bar...... .................. ....15 Tap room....... ................ 1 (Other: tennis courts, putting greens, free coffee, boat dockage, continental breakfast, picnic grounds, conference rooms, private beach, kennels, babysitting, free car wash, direct dial telephone.) Motels at their inception provided rooms and little more. It is evident from the above that since ther the array of services offered has changed and ex- panded considerably. The owners and managers were not very explicit about the services offered, beyond those major services such as restaurant, bar and swimming pool. It is inter- esting to note the number of swimming pools (thirty-six out of eighty-eight), particularly in view of Michigan's northern climate and considering the high cost of the average motel swimming pool. One of the motels inter: viewed had an indoor pool. Two had two swimming pools -- children's pool and adult's pool. 28 Question 15. Mailed responses. (68) The motel person filling in the questionnaire is the: Both owner/manager.............33 0wner....... ................... 29 Manager.... ............... ..... 6 Unnumbered question. Interview responses. (30) Position of person interviewed. Manager ........................ 14 Both owner/manager ............. 12 Owner.. ........................ 3 Executive assistant manager.... 1 Total motels studied. (88) Position of person interviewed or replying by mailed questionnaire: Both owner/manager ............. 43 Owner.............. ............ 36 Manager.... .................... 8 Executive assistant manager.... 1 Question 7. Mailed responses. (68) Geographical location in Michigan. Lower Peninsula ..................... 58 Detroit area ................ 19 Southern ........ . ........... 15 Eastern.....................11 Western ..................... 11 Northern .................... 7 Upper Peninsula ..................... 10 The mailed questionnaire went to motels in various cities throughout the entire state of Michigan. Thirty interviews were conducted in seventeen cities in Michigan. A tabulation is not presented for the geographical locations of the interviewed motels due to the possibility that the owner/managers might be identifiable if such information were included. 29 Question 8. Mailed responses. (68) Location. Suburbs ................... .....42 Downtown........ ..... 2. ........ 19 Country........................ 7 Question 5. Interview responses. (30) Location. Suburbswcountry ................ 25 Downtown ....................... 5 The interviewer found it difficult to determine with any degree of exactness whether the interviewed motels should be classified as located in the "suburbs" or in the "country." Some were located at the extreme outskirts of cities or at the fringes of the ever- "suburbs" of large or small changing and hardwtoudefine communities. The interviewed motels were classified as five which were unquestionably located downtown. The twentymfive which were not located downtown were classi~ fied as located in the country and suburbs combined under one category. Many of the motels classified as located in the suburbs were small, metropolitanmtype motels catering to manufacturing and business districts. Question 9. Mailed responses. (68) Year motel was built. Earliest year.... .............. 1940 Most recent year ............ ...l963 Median year.... ................ 1956 3O Number of Year Motels Motels Built Built 9.... .......................... 1959 8.. ....... ....... .............. 1957 7.... ....... ......... ..... .....1956 6........ ................. .....1960 6 .............................. 1954 5... ........................... blank 3... ................. . ..... ....1963 3... ........................... 1962 3... ....... ... ................. 1952 2... ........................... 1961 2.. ........................... .1958 2 ............. . ................ 1955 2... ........................... 1953 2 ................... . ......... .1950 1..° .......... . ................ 1951 l.................. ............. 1949 1 .............................. 1948 1 .............................. 1947 1 ............................... 1946 1 ............ . ................. 1945 1....................... ....... 1942 1.. . .......................... 1940 Question 6. Interview reSponses. (30) Year motel was built. Earliest year ..... . .......... 1948 Most recent year ............. 1964 Median year .................. 1959~1960 Number of Year Motels Motels Built __ Built 8 .............................. 1962 4 .............................. 1959 3 ......... . ....... . ............ 1961 3 ... .......... . ........... . .1958 2.... .. . ...... . . . . ..... 1960 2 ..... . . . . .............. 1956 2 .. ..... . . . ............. 1955 2 .. ..... . ..................... 1948 1 ..... . ........................ 1964 1 ..... . ..... ... . .............. 1963 l . ........... . .............. 1953 l . . ..................... 1949 31 Total motels studied. (88) Year motel was built. Earliest year ........... . Most recent year......... Median year.............. Number of Motels Built 12000000000 OOOOOOOOOOOOOOO ...... 1940 ......1964 ......1957 Year Motels Built HHHHHHHmmmwwwWSthflmmm H \o m m Question 7. Interview responses. (30) If additions were made to the motel, No additions...... ............. 21 Once ........................... 5 Building other motels .......... 3 Twice........... ...... ......... 2 Adding restaurant ..... ......... 2 Three times........ ....... ..... 1 Four times... ............ ...... 1 Plan to add. ....... ............ 1 Adding gas station .......... ... 1 they were added: 32 The interviews disclosed which motels had made additions and which had started small and grown larger. Of the nine who plan to make additions, several plan to add meeting rooms, and a few were in the process of remodeling and upgrading their present facilities. Question 32. Mailed responses. (68) Business is a: Proprietorship.. ........ . ...... 30 Partnership............. ....... 23 Corporation... ............ .....15 Question 9. Interview responses. (30) Business is a: - Corporation ..................... l6 Partnership..... ............... 9 Proprietorship ............ ..... 5 Total motels studied. (88) Business is a: Proprietorship ................. 33 Partnership .......... .. ........ 29 Corporation.. .................. 26 Seven of the thirty motels interviewed could con- ceivably be classified as "ma and pa" types of motel opera~ tions, although their size and their management practices indicate otherwise. Two of these were corporations, two were partnerships, and three were proprietorships. The classification "ma and pa" indicates that both a man and his wife owned and/Or were active in the management and operation of the motel. 33 Question 2. Mailed responses. (68) Your motel is: _ Independent................. Franchise... ................... 8 Affiliated. .... ............. . Chain. . ... .................. 2 Blank.... ..... . ................ 1 Question 2. Interview responses. (30) Your motel is: . Independent ......... ...... ..... 15 Franchise ...... . ........ . ...... 10 Affiliated ............. ........ 6 Chain ..... . ..... . .............. 4 Co-owner ....................... 1 (Affiliated: all 6 are affiliated with AAA; 5 of these , are independent; 1 is a franchise.) Total motels studied. (88)1 Your motel is: _ Independent .................... 65 Franchise... ................... 12 Chain...... .............. . ..... 6 Affiliated ............ ... ...... 3 Co—ownerr‘ ...................... 1 Blank.... ...................... 1 Question 75. Mailed responses. (68) Affiliation: AAA. ...... ............. .....9 Plan to affiliate in the near future. . .. . ........... 7 Never really thought about affiliation. ................. 5 Imperial 400..... ............... 3 Inn America.... ................. 3 Holiday Inns.... ........... .....2 Quality Courts....... ...... .....2 Best Western.... ....... .. ....... 1 Howard Johnson..... ............. 1. Master Hosts... ....... ..... ..... 1 Superior Motels... .............. 1 1Includes 6 AAA from interviews. 34 Question 10. Interview reSponses. (30) Affiliation: Franchise - 10 Holiday Inns......... .......... 5 Howard Johnson.... ............. 2 Inn America.. .................. 2 Imperial 400 ................... l Affiliated - 6 AAA ........... . ................ 6 Chains - 4 Holiday Inns...................l Albert Pick.. ...... . ........... ,1 Stouffers .............. . ....... 1 Independent. ..... ..... ......... 1 Total motels studied. (88) Affiliation: _ AAA ........................... 14 Plan to affiliate in the near future ................. 7 Holiday Inns.................. 6 Never really thought about affiliation ................ . 5 Imperial 400 .................. 3 Inn America............ ....... 3 Quality Courts ................ 2 Howard Johnson ............ . ..... 2 Best Western .................. 1 Master Hosts .................. 1 Superior Motels ............... 1 Albert Pick ......... . ......... 1 Stouffers... .................. 1 Independent chain ......... .... 1 Definitions of Classifications of the Motels Studied Franchise: "A franchise is generally defined as the right granted to a retailer by a supplier to handle the supplier's 35 product under certain conditions and stipulations. The right is frequently exclusive, at least in a well-defined area...The advantages to be gained by the franchisee are summarized as follows: 1. A lack of training and special skills can be overcome by the teaching program of the franchisor. The capital required is lower than setting one"s own business independently. The franchisor usually provides one or more of the following: help in the site selection; basic plans for construction; help in fi- nancing construction; assistance in training staff; systematic and wellmorganized business procedure manuals. The product is generally advertised on a national scale and product recognition has been established. The parent company frequently provides central commissary or purchasing organizations that enable the franchisee to save expense... few disadvantages are: The franchise agreement is generally restrictive as to style of operation and products sold° It leaves no room for imagination or for changes in style because of changes in customer demands. There is normally an initial fee plus a royalty of some sort. The royalty may be a minimum plus a percentage of sales and become a burden during slow periods. 3. There are usually restrictions pertaining to entering the field competitively after a franchise agreement is terminated." Chain: A chain is a group of motels owned by a parent organization. Three of the motels interviewed belonged to national chain organizations. One chain motel be- longed to a small group of closelywheld stock not opera- ting under a common name. Independent: The independent motels in this study were those which did not belong to a franchise, chain, or affilia~ tion group, nor to a national referral group with the single exception of the American Automobile Association (AAA), which is a recommending group. Affiliation: Affiliation pertains to those motels which have joined together under a given trade name (for example, Best Western or Superior Motels) for the purpose of ad» vertising, referral and reservations, and for the setting of standards and procedures. Also included in this break» down were members of AAA. 1John D. Lesure, "Franchising in the "60*s," Institutions, (Dec., 1963), p. 69. Co-Owner: The owner/manager of one co-owner motel was inter- viewed. This was a TraveLodge Motel. Co-ownership in this case means that fifty per cent of the motel's stock is held by the parent company (TraveLodge) and fifty per cent of the motel's stock is held by local investors. The above definitions describe the various classi- fications of the motels in this study. CHAPTER V MANAGEMENT The Owners Question 14. Interview responses. (30) What was the owner‘s previous business experience. Hotel-motel experience ......... 9 Contractor or construction business ................. *....7 Other various businesses ....... 7 Real estate .................... 3 Restaurant ..................... 2 Bowling alleys ................. 2 When the owners were not themselves available for interview, their backgrounds were described to the inter- viewer by the motels‘ hired managers. The interviews pertained to the major owners of the motels. Excluding the five chain ownerships, the twenty- five remaining owners studied had had previous business experience. This experience was in varying kinds of businesses and was of different types and extents, but the vast majority of the twentyufive had owned a business or several businesses (hotels, motels, restaurants, grocery stores, dry cleaning establishments, bowling alleys, con- struction companies, etc.). Some started working in (and gradually investing in) businesses and proceeded to expand 38 39 into ownership of one or several businesses. Many of these men still do own these other businesses in addi- tion to the motels. They entered the motel business with funds which were profit from other businesses, or some sold their other businesses and used the funds to invest in a motel. A few had previously been employed by firms which they did not own, generally in a managerial or sales capacity. These men saved their money and invested in the motels with which they are now associated. Two of the twenty-five owners used inherited funds to enter motel ownership. These two had had business ex- perience before their inheritances. One had worked as a salesman and the other had worked as a hotel manager. The twenty-three who had not inherited their motel in- vestment funds had earned (through business ownership or salaries) their funds for entering into the motel business themselves. There was a relatively high level of education in the group of motel owner/managers interviewed (see inn terview question 24, page 41). It was learned during in- terviews that many of them had worked their own way through college and had continued to work their own way up into the business they entered after their formal education ended. 40 Question 18. Mailed responses. (68) Are the owners active in management. Very........uuw...............53 Moderately..................... 7 Seldom................. ........ 5 Not at all......° ...... ... ..... 3 Question 20- Interview responses. (30) Are the owners active in management.. Very..... ............ . ......... 17 Seldom.......... ...... ......... 7 Moderately..................... 4 Not at all......... ..... ..... 2 Only three of the owners who were "very" active in management had hired managers according to the mailed questionnaire. The Owner/Managers Question 15. Interview responses. (30) Had the owner/manager (person actually in charge) had previous motel experience. Eighteen persons in charge had had previous motel experience. Usually they had worked as manager in another motel prior to their present position. Three of the nineteen hired managers.(see interview question 21, page 46) had not had previous experience as a motel manager. Two of these three had, however, worked as assistant motel managers. The third had been engaged in industrial rela- tions not in the motel field. It was in most cases the owner who was also his own manager who had not had previous motel experience. 41 During the interviews, all of the owner/managers were asked why they worked in the motel business. The following varied replies were among those received: "I was raised around the business." "Besides owning this motel, I also own another motel." "It was a dream to own a motel all my life.” "I owned seven cabins and a restaurant. I sold them to build this place." "Iive had various hotel and motel jobs.” "I was raised in the motel business." "I remember when metels bad twomholers and a boy who carried buckets of water I was the boy." All of the owner/managers who had had no previous motel experience had had varied business experience. Some had owned and/or managed restaurants, for example. One had worked in public relations, and one had been a trave1~ ing salesman. Question 24. InterView responses. (BO) What is the owner/manager’s educational background. Bachelor9s degree. ..... ..... ..14 High school graduate .......... 9 Two years of college .......... 4 One year of college. .......... 4 Less than high school....... 4 Wife (active in management) is college graduate............. 2 Mastergs degree..... ..... ...... l 42 The Bachelorls degrees were in the following areas: Hotel management ........ .......4 Engineering....................3 Business.......................2 Education......... . 1 MUSj—COOOOOOOOOOO0000000000000001 Forestryooo0000000000000000000l Speech.........................l mathematicsoo00000000000000.0001 The above totals more than the thirty interviewed because in several instances more than one person was directly associated with the supervision of the motel and had an educational background which was available and pressed into service by the motel. For example, in some motels a man and his wife mm or an owner and a manager m~ were both very active in the management of the operation. In some cases the above tabulations pertain to the ownership and in other cases to the management. In some they are composed of both combined. No attempt has been made here to identify which was owner and which was manager because in all cases the education and training of the persons included were available to the motel. Question 23. Interview responses. (30) Who relieves owner/manager for his time off. I haven't had any vacation ..... 7 Assistant manager. .... ......... 6 Owner. ............ ............ 4 Department heads take over ..... 3 Partner. ........... ......... 2 Relief Clerk... .......... ......2 Line employees... ...... ........2 Cleaning girl..................2 Father... ..... .. ........... ....2 43 Daughter ............ ........... Desk person.. .......... . ....... Day clerk......... ...... . ...... Catering manager............... Auditor....................... Secretary...................... Mother.................... ..... Sister-in-law...... ...... ...... Father-in-law.. ..... . .......... Food manager......... .......... ‘ Accounting firm................1 Owner's business manager.......l I'm not satisfied if I leave...l i—‘l—‘l—‘i—‘Hl—JHHl—‘M The above totals more than the thirty operations interviewed because several establishments had more than ‘one person who could relieve the owner/manager either for time off of a few hours or days, or for a more lengthy vacation. A cleaning girl might, for example, take over for a few brief hours, but was not trained or qualified to do so for a longer period of time. Seven said, "no vacation." Several said they did not feel they could take vacations until the operation was "on its way." Three of the hired managers stated that they had not had a vacation in almost two years and hoped they would get one soon. The above tabulated figures do not clearly portray the problem that exists. Typical ownership/management interview comments in answer to the above question were as follows: "My dad, my daughter, my father—in—law -- we keep it in the family." 44 "No one relieves me. The organization runs itself. I might put an extra person on the front desk. My secretary is very competent and takes over any problems when I‘m out‘of town. Besides, I'm in touch by phone every day." "We have a relief clerk who works a minimum of forty hours a week. The wife of the relief clerk can also help. They move into our apartment if we're gone for several days. 'The relief clerkis wife was a switchboard operator, so she can help." "We like to leave but we canit very often. In a small motel you canit always live the way you like. Our daughter does occasionally take over. There's really no one around who can do it." The above comments, and especially the last one, indicate the plight of some owner/managers. This prob~ 1em of achieving time off is especially acute for the small operator. In the larger operations, department heads or as» sistant managers can relieve the manager for time off. The manager is able to delegate to other personnel. In the small motels, however, the owner/manager must do al» most all of the jobs himself. There are several reasons why the owner of the small motel does not have consistent relief. One reason is the economics of the small motel. The business does not in some cases generate sufficient income to pay all the bills, pay the owner an adequate salary, and also provide sufficient funds to pay for competent relief. A second problem is to find capable individuals who are 45 willing and able to work on a part~time basis for the wages the owner can or will pay. If they are capable they probably cannot come in for an extended period of time to relieve the owner for a vacation for they are usually employed elsewhere, although it is possible at times for the owner to hire capable employees to take over for an evening or for a few hours. This might be indicative of poor management on the owners' part, or it might again be the economics of the business in that the owner needs (for his financial obligations) the money he would pay his relief person. In addition, it should be remembered that the work around a motel twenty-four hours a day is not always of a physically tiring nature, but someone in charge must be on the pre- mises at all times. The owners do have employees -- of all the eightym eight motels studied, only one motel had neither full-time nor part-time employees (see tables on pages 49, 50, and 51). This motel had only seventeen rooms and was low cated in Michigan's Upper Peninsula. The owners do not, however, spend time and money to train these employees and work them into assistant managerial relief positions at their motels. The motels concerned are for the most part twenty to thirty rooms in size and in overwhelming numbers their major or only employees are maids. When 46 the owner is present on the premises he can handle all of the work involved and dOes not need an assistant manager. He needs a capable assistant to take over only when he is absent, and he feels that his staff, which consists almost entirely in most cases of maids, is not capable of being trained to take over as competent, more highly-paid relief managerial personnel. The Managers Question 19. Mailed responses. (68) Is there a hired manager. Noooooo ooooooo . IIIII .I,‘((.Jertain rooms. Another girl may make up that room on the assigned girl”s day off, but the deep l-aning is the responsibility of that assigned girl. Each maid checks a room list in a special way so I know exactly who made up each room." C q p 0 "We use the Howard Johnscnss Manual." 70 "We have one somewhere but I havenit looked at it for a long time." "We follow the Holiday Inns procedure." "We try to do it on a personal basis. A checklist doesn't mean a thing. We used one once but found the maids filled it out before they went in to clean a room!" ’ It is indicative of good management practice that of the thirty owner/managers interviewed, nineteen had a written standard or procedure. Other owner/managers ree lied on an inspection procedure instead of writing out a cleaning procedure manual or preparing a written check- list. F. Problems With Maids Question 29. Interview responses. (30) What is the major problem with the maids. The answers varied, but the following tabulation is indicative. Inattention to detail... ,... .l Donit have any problems. We have very nice mains ._. Turnover............... .. -... Young maids not very good ..... mommom Most of the motel owner/managers interviewed were very satisfied with their maids. Those who answered, "I don't have any problems" were in most cases not the same ones who said, "We have very nice girls." Only two out of the total of seventeen who replied ”no problems" or "our maids are very nice" were duplications. 71 Most of the maids working in the motels interviewed were older women, and this was by preference of the owner/ managers, who found that the more mature maids are not so often absent to care for a sick child at home, and in gen- eral they work better and more reliably. All the maids in some motels were white women, all in others were Negro. Many managers employed both white and Negro women. The only criteria was the quality of their work. Only two managers stated a definite prefer- enCe in the matter. Both said they preferred the Negro maids. One said: "There are more Negro women looking for work, and I find they do a better job for me." Some average comments received during interviews on the matter of problems with the maids were as follows: "I don't have any problems, My girls know their work, and they go and do it.' "No major problems. Once in a while a maid will skip over a room." "Little trivial things. Many are afraid their friend, another maid, might do less work." "Sometimes the maids are too noisy in the morning when reporting for work." "The fact they are women. Get a group of women together and you get a bunch of petty squabbles. We do have a pretty nice group of maids, though." "I found the way to end problems with my maids. We have a regular girl who is the housekeeper. Occasionally I will give another girl a chance to work as housekeeper. It is a break in the 72 routine for the housekeeper. I hold whoever is the acting housekeeper responsible for all rooms. It's a lot better for the housekeeper to tell the girls something is wrong than the manager. The housekeeper draws constant regular pay. When the maid is acting housekeeper, she gets extra pay. We also vary the rooms to clean. It puts the shoe on the other foot. For example, a girl may be assigned so many single rooms to clean and is assigned a grouping with fewer single rooms and more double rooms. It's a break in her regular pattern, but she's soon glad to go back to what she's used to." The only chronic problem which was consistently mentioned by the owner/managers was that occasionally the maids would miss some cleaning Job in a room. They soon learned, however, through their inspection procedures, which maids needed to be checked and supervised more than others. Every owner/manager periodically checked rooms himself to see how the maids were doing and to study the condition of the rooms. The manager's inspections, in” addition to constituting a routine procedure, were also- performed in order to determine which rooms needed extra cleaning, such as carpet washing, for example, which is not part of the maids' standard room cleaning work. Unions Question 29a. Interview responses. (30) Do_you have a union. NO. 0 O O O O 0 O O O O O O O O O O 000000000000 20 Yes. 0 O O O O I O O O O O O O O O O 00000000000 5 AlmOSt. O O O O I O O O O O O 0000000000000 3 Blank........... ............... 2 73 Most motels included in the mailed study were too small to have a union. Only the very large interviewed motels were unionized. The smallest of these had eightym one rooms. The unionized employees were usually the maids and porters. During an interview, one owner commented: "We have been union since we opened." Those who answered "almost" to the question stated that attempts had been made to organize the maids. One owner said: "When I opened here, I had an antagonistic house- keeper. The first thing I knew, I had a union business agent here with a contract wanting to organize the establishment. From time to time I have had pickets out front, but I have never signed. One of the ringleaders, a maid, was fired for fool- ing around with a guest. I was very lucky. The next day the business agent and the maid were ready to picket and close the place. All of the other maids, however, reported to work as regularly scheduled. The other maids felt the maid dew served to be fired for fooling With a guest. Had I fired her for practically any other reason, chances are the other maids would not have re~ ported to work. I pay union scale or above, and they eat on company time. They start at eight o‘clock and quit at four and are paid for eight hours." Three of the five operations which are unionized are chain operations and the other two are franchise ope erations. When the manager of one unionized chain motel was asked if he had any problems With the union, he replied: 72+ "No, we get along fine. We're glad to be unionized. After all, this is a union town. Many of our guests are associated with unions." Two of the unionized motels have had employees out on strike. The other three establishments mentioned no major problems in regard to union relations. Policies and Decisions Question 20. Mailed responses. (68) Who sets the operating policy. ; . Owner..........................48 Manager........................ 8 Both owner/manager............. 7 Other.................... ..... . 5 (Other: restaurant manager, management company, partners.) Of the sixty-eight motels, the owner set operating policy in forty-eight instances, and the manager did so in eight. In seven cases they set operating policy Jointly. Five replied that "others" set operating policy. These were either a partner (another owner), or a management com- pany, or the restaurant manager, whose policy—setting was related to the restaurant department only. These facts, combined with the fact that the median size motel in the mailed questionnaire was only twenty-three units, points to a somewhat limited scope of responsibility in manage- ment activities by the hired managers. Question 22. Interview responses. (30) Who sets the operating policy. Manager................... ..... 18 Owner...... ....... . ............ 12 75 A meaningful comparison cannot really be made be- tween question twenty mailed and question twenty-two in- terview. The motels which were interviewed were larger establishments. A few of the smaller interviewed opera- tions did have hired managers, and in two instances man- agement of the operation really was left up to them. In these two particular cases, each motel employed two maids and a part-time maintenance man. Question 73. Mailed responses. {68) Approximately how much time per day does the manager spend on day- -to— —day operating problems. 1 to 2 hours..... .... ......... 20 More than 3 hours..... ......... l6 2 to 3 hours............ ......13 Blank..........................lO Less than 1 hour... ...... . ..... 9 A comment received on several replies: "I seem to spend ten to twelve hours a day on operating problems. Thatis all I seem to do." Question 28. Mailed reaponses. (68) The overall day-to-day decisions at your motel are made by: Owner. ....... ........ .. ......... 36 Manager. . ...................... 22 Both owner/manager ...... ....... 5 Senior partner............ ..... 5 The manager does have authority to make daywto-day decisions in twenty-seven motels. There were twenty-nine managers in the sixty~eight motels. 76 Question 21. Mailed responses. (68) Criteria for distinguishing between major and minor decisions. Type of problem involved.... ..37 Amount of money involved.......2u Number of personnel involved... 5 Individuals involved. ........ 1 Who cares: .................... 1 Question 22. Mailed reSponses. (68) Who makes major decisions. Ownero c. I O O 9 O O 3 O O O I C .. \‘ O O t. D O 0 C 0 R7 Manager. ....... ... .......... . 6 Both owner/manager... ......... 5 A comparison of the two above questions (twentynone mailed and twentyatwo mailed) shows that the owner parti- cipates in the making of major decisions at sixty-two motels out of the sixty-eight which replied. On question twenty-one mailed, the reapondents stated the two replies "type of problem involved" and "amount of money involved"‘ a combined total of sixty~twc times. A problem which the owner decides is a major type of problem, and problems which involved the motel‘s finances were, as it would be expected, handled by the owner. The hired managers, howm ever, often recommended courses of action which the owners consider when they make major decisions. Question 23. Mailed responses. (68) Who makes the minor decisions. ownero o o o o c o o e o a 9 o n o v o o o c o o o o 37 Manage%:0 O O 0 O O O 0 o O O 0 U 0 O C 3 O L: O 21- Both owner/manager.. ......,.. 5 Department heads ..... .......... 5 77 The respondents are again consistent. Twenty~six of twenty—nine managers make minor decisions. Five de- partment heads also can make minor decisions, usually with the manager“s or owner‘s knowledge and approval. Question 31. Mailed responses. (68) Which of the following individuals have the power to hire and fire. Owner. ....... .......... ......... 54 Manager.. .. ..... ‘ ..... ............25 Department heads. ........... 4 Assistant manager“ ... ....... 3 The manager, the assistant manager, and the dc~ partment head are again classified as making decisions or as allowed to make decisions. This number is only one answer different from the thirtywone corresponding re- plies on minor decision making given to question twentyu three mailed for the managers, both owner/managers, and department heads. Question 36. Interview reSponses. (30) Which of the following individuals have the authority to hire and fire. Manager ...... ........... ..... .-..l9 Owner. ......... ... ...........15 Department heads....... ..... .....10 Other.... ....................., 6 Again the respondents to the interview question~ naire were very consistent. Nineteen managers out of nine- teen managers were given the authority to hire and fire. In ten cases, department heads were given authority to hire and fire. The tabulation of question thirtyweight in- terview discussed earlier in this study demonstrated that in nine motels the executive housekeeper may hire. q During interviews, some of the owner/managers: comments were as follows: "The housekeeper can hire if itls absolutely necessary- However, she usually checks with me first." "The housekeeper is given the responsibility to keep the rooms clean and a standard number of rooms for each maid. Itls up to her to keep a . -_ ., H, J: V'€-X~AJ Several of the owners or managers stated that they would allow the department heads to hire mm usually with their approval _w but that they did all of the discharging of personnel themselves. One manager reversed the situation, however. He permitted his housekeeper to fire employees, but he did all of the hiring. He said: "I realize this is a rather unorthodox procedure. Sheis a very good housekeeper, but she s had very little experience in hiring. She would hire ale most anyone who applied for the job. Shecs just not skilled in interviewing. I guess maybe itts just because shefs a little too easygoing." Question 59. Mailed responses. (68) If the motel were to expand, who would make this decision. "7 OV‘Jn e r U U 0 I: D O 0 O . Q 0 I' O L ‘J 9 O 0 0 k. 3 Q t’ V'- C 0 I B 1 ank O O O 0 O 0 O O 0 O 0 Q ) O Q I} G C O O J (‘ 9 O (‘ Q 1 This again is consistent with the replies to question In twentymtwo mailed concerning who make— the major decisions. ‘nCo \.v.\‘- lo the deeply involved financiall n ions 9 i (I) ‘13 because the owner would decision y in any be for motel cf .11‘ (T; (I? {In ’1 Ii (‘7 [1) During the interviewer three managers stated tna they had made recommendations tr the {where tn expand to add more rormsh The; hsd worr:l u. ' r neial press tions of estimated see”: ari rt‘,“r3 One of ‘nese sa that the owner of the motel we managed was in the prcc ”f a . ~ tde rew rrcms basei upon The manageris resan mendatic s. The sigsvsfi17 * n"‘ by the :ther two war had not been reiected rut we'e ell under corSideratian by the rwners 4ft .,..- ’. r‘ q f»‘! ‘ '~,-.- iii/‘- uuestion 7s_ Mailed responses toe) Approximately how mucn average time per day sees the manager spend in planning for future business and cper tioral improvenent“ Less trari l h€u-.. 9' l to 2 nturs , .l Blank o ,. .. l? 2 t" 4 fif"? a .. b IVE? I": [HY-1,1“ 'l " 1'1 4' I? These replies were errslsteri with *negr 1’9wfiT3 wall:d question serertp itrrs new much time does tn manager sperd on day to day cr+rat1ng preblems The r 8 responses to question seve. U) Consequently tn L for future business i cfi time Fh day~tcuday V ’m‘t the-r t;we spent in planning The abo HI ‘1‘ Q (I) w nterv H» (D V 3 daily operati tandar C‘ U BFV CW”??? 1? I ‘7‘" L" 1 '7 ... ‘ ' K I ‘ I. M: " ' ‘ ii “3‘ 1 4 A Q " “ ‘v.~r\ -' - .1 d ,7 l C 5px: ' L c . ~ ' -, . Oi problems, in; bf. ”2.1"? 15 hr“ ’"E U- ' m? "(I 5—,‘ r”? [I 1..-Ire ‘L r ‘) fCJn’ tn? W1 A ~— W V6? “ (.7 Cf ed ng d ' t are o L.’ ; :n de I T" . - e- r: *1 I, G 9161,“. T: keepinq it :rd Cffa‘l” ' -+~ w ~.-- v HLLLH'}; lug t ments needed have los daily upkeep. rm .1“ C S and tremendo ke to t through A r._J: (1‘ U T.- '(5 1-4 ready for the gue {T A 3-4 51‘ pICClE ~ s T -_. a f‘ - L (‘1. C‘ i‘ \. ‘_.‘ " r L t A. A v A L; ' l ‘5 .. :1 ,. g- I- ‘ r_ Pf :- r2 ._l L" K r 5‘ K 7 ' ‘ ‘ .7 r“ .' \' ..A‘ ~' '1} L'u l. .4 ma U) 'l-i‘f l J." *r ‘1 U ‘ u) : v f ‘- ‘5’1 ,CL: ,1 J, K. t 51h» \ J \ i). AV a) y l 1" 3} V’V‘l.‘ k . :2 r - L "(2 v .2 X? f" v, 1 - " T l 7, (4- "! C T. h {1 C ~ ~-\ ‘\ ‘ ‘ »-4 Y. I 5.; I _o .i J n' r‘~ ('7- ‘r "\ .L 1 ' :x L} ‘x. a ,F .‘ , 1).. .. ‘_ ' l 1 5 t _L K.‘ C "i. " i' V I” V x I: ‘ .. k .J l ' “,7 V5 w A 'l I ” {T T (’1 Q 11; ’ _ V _ i- t—Hia F (f r'E/ ,- L‘Jx ,. ml , k 1‘) TR] ‘ V L l-Ji cw ,, excid I ay all , 1 7 ,l.‘ 1 a lar Wltfi hi I r7 4 ex - {7* \J L A; ‘- 1 lg «n t~ \ A '- . I T " \N j. _‘ '. l 1 ' - s. § 5" ‘- 4‘ we L . a: L '. C- r- : ‘ >4 ., .L L ‘Ll 'I n .‘j i i .9 ‘q‘ r C 7'” “ f" I‘ ‘ W" . ‘- W ‘ ”‘ l 7 \ _; | k: t,‘ if: m L '3}: ,l T ' ‘ I"? .3 U) ~ \- ‘C- men 73.3%; “\ (K, we ordin (D F.) “pflj W t? I." 4, pa (1’) l CO is for 2 fair 3] sked directly during rt ‘ I": hat all de« v: Uldfl 7‘ 1: imprfvve mieht ,2 v- r? A a N" 1 l' ;Q.’""\h\7‘ .J. J. ..L C \— ~. I» ".J r t“ _ 3 (A J O J p Q m K C"? O I (:2, t1 1 \1‘ ldthfl OI expensive, great difficulty at a u CHAPTER'VI ACCOUNTING AND FINANCE Cost Per Unit Question 46. Mailed responses, {68) What was original cost per room with furnishings, Low. 0 o o o o o o o o o o o o a o o a o o o a c o a o c c$ 2,500 High:: 0 a a o o o o c o o o a o o o I o o o a o o I) a o a 12,000 Mediano o o e o o a o o o r o o c c o c o o o ., t. o o 0 6,300 Number of Motels €23: 20.,,,,0.,,,..,,,,.,C,,,,,,to..$ 6,000 to $ 7,999 1700,.,c,OOOQOOOO,0,0.ooooooenoiess than $6,000 17.0,ooo.o.o,,ccooooaoooc,oo.,,blank 9.,°.,,,°.,,,,,,,,,,.,,.o,,,,,$ 8,000 to $ 9,999 5t.oooon.oo.oo,,,t,o,c,c,oooo. 12,000 and over Question 47, Mailed responses, What was original cost per rfiun '5thcut furnishings, 5‘ :1 ‘5' t 1 "‘ LO w o O O 0 O 0 O 0 0 O o O 0 0 :‘v 0 -‘ a f n 3 (l c t; c o $ 2 ‘9 C) O O H i gh C 0 0 O O O O O O O '1‘ ‘3 3 C: O 3 0 0 O i , ) 2 C O ‘2 O l 1 , O O O M e d 1. a n c o 3 O 0 r. o O :\ c U 2‘ 3 1‘ '3 U .1. u e 1 u a _ .3 a 5 j 7 O 0 Number of Motels Cost 26 O G O 0 O O I: O O G O O O '3 O 0 0 u -« O O 0 s U 0 C U C O b . 20,,,,,ooooooooo,,,,.3,,¢0,,,,.$ 4,000 to $ 5,999 12 ,oooooc,,,,,,o,.,,, 0,0,ooo.’ 6,000 to 7,999 5co°,o°,,,,,,°,,,.ooe9,000,,00 8,000 to 9,999 3..oooo,,,ooaoeo,,.oo,OOOOOl.,less than $U,OOO 2,,,.,,,,,.,,,,,,,,,,30,..,,,.$10,000 to $11,999 The above indicates a high total motel cost, The median size motel in the mailed study was twentymthree units, 82 The median size metel a total investment of $14k (W C) st tures, The cost K‘. \J {V ubt tracting the \ ‘questlcn M7 mailed) ' 'V‘Il'l r-‘a -. impreve I ,- EC 0 .f swimming pool, I D riv-;Jd t/ the t hum and em: at; an: an L ine motels whr with a. 153115651" number. cost and ”Today the aver ment of as mar that a twentymf investment of -4—'.:~\~'t,-I-I - JDoug Ctschran, T0ur is t Court ournal "“““‘ A ‘ t‘mflt-‘N 4;:- AI --_.c.—«‘,.. ...—... .... computed ‘ablishment Of furniture fr: per IGl mart *_. above , naf p rigi. r F," Tr ~—-.t ~ a . 5.4 —— A :4 r< / ,7 V- r a p. l . mr’ cm 'L' L \. s A (W " 9" I _M"! _“;-n “4 tru---v(.—.I i._-. u -1 « 4 : "Future (May, at” u , 900 ,, iudl (1 7 d) This fixtures 1 l N " A”, I J' i LV “"1 - "I" u r c; , ,L' 1 ~ lt-""":' “'1":i i , . é dei:rn,r ing land 0 7 ‘ :1 1’1 " f7 T? w T? hrrl '1' 3‘, ‘4‘“ _ $ 1! L .. .J 4 s 1, 1; L J are found iar cost { - I Y C‘Y".l r— A x b, ‘ U I"; I 'speration r“ {f L...’ x d ”1.111 the Mote bun. p, ' J'I/F" W would be 11 ,__ L and f rr- the total ixw computed by :t furnis pg f rec ( f ’\ F4 bui p: f m sing U4 lding Sp 3" f‘ I‘ V ' V“ IIETL‘I’V? thuS Cl c} , f a, ( - x s, k L 4 r3 \, f y t }’ * ' i ‘ n. r r s i ? T V > v ”s ‘ /. u , . be) in he F113 4 ' 1 ('1' ‘1 C a T: you can , might call for ; wI 3' me —~ - A. " Lou: )‘ulldr’tr * [’11 a): median cost requires U] G: (T) The cost per room is a very important yardstick 1n U1 H J) ”"x y. t H 1 Q‘! J | the analysis of motel general telewofwthumb widely known and accepted in the mitel~holel infustry which as follows: one dollar should be charged in room rate L4 (D for every thousand dollars per room teeth This would in» CL f >1 (\ Du rfl‘ ’L (‘1’ L1) 1:? Q .1 ) l ;_1 r1 _) J S Y ) , a: [—f ) (1 Z) ’3 ffl (‘T a C: (3 if V) - - .. ~ ‘ A -. v-»,. A»? , , ; o ., . ' ..,. and furnish should Igflt for we to }a« rlhhtt Prices are, nowever, proscribed by the more; s p1ttloalar location, will bear" and thi. C f) if} 3 O 5. H x1. L p ’1 Ix («f D“ (D r? x 73 ID and cost of the motel Conetturtevt None of the respondents I) “'5 U i Q L) ‘ ('1‘ . ) (‘1‘ Q) 1.-: '0 (T) w i ‘ ) 0 5 O O ('11 CT of fiQfG than $12 000; pg: F”»' more;s did have a $12tOOO per room cost“ , ., a n. : Q -\ [x r- a f. 1. (- " W 7 y 1“ 1 A L J_( ‘ ( ' ‘V . f '2 ' ' ,. L 2.; I r ‘ k _ _ V r" /' , ,I , - —. ¢ ‘ _ 1 V» . p 9 .1 y - F ¢ 1 r 1 ‘ § f ¢ /— (Y . 1" § /. I VJ, ET I 1. 1" ,1 .."- k l E’ L," T \ t: LI}! 1 ‘ ‘. 51 I H": LA"\,'«'.1 N v— ' - a , u 4‘. — ‘ V 5 “1 ; Lt. ; ,3 . r7. 7;; >7 y- t r ‘ it i r ~ 1 't’i f (.5 I’VE-£3. T; i <7: Y1 1 33 (”'33 C 'L 13/ I" 4.11 L f“ 7' .1 f." C! _‘L ”4 ET .1 ,- l 2 T 1 C 53 ’I f L.) I ‘l .4 ‘ ’\ I W t/ r .3 w (11 question w asked and usually ‘Wpersooal mailed questionnaire phase Cf 2% P ;t;1v (3 m of a O ”S T One motel interviewed ddite prohahlv 11d C than the $l2,000 per units 1: u»: lav13tly add expensively U} y 3' designed. Many of the Furnishings and leturt (I) U7 were speciallywbuilt on the premises; which raised the cost of the rooms2 appointments far above the cost which would have been involved had they been purchased from a concern utilizing mass production methoosn This operation was exm ppeated that basic (‘9‘ 9‘1 periencing financial difficulty. T costs were too high for this motel2 and the motel u) u) i (D \l was not achieving adequate occupancy. It is not explicitly or the l w oooue {/1 CT 0 V provable which factors we the high co, ‘- ' r ,'- l ‘u ' ‘ N a " " H. x , ". ' fl -‘ ‘“ U pancv 9“ both mm caused this hotel's present financial diffiogltiesq It can, DWV‘UCVu be aisqmed that the exm cessive cost per room is assurcolv a contributing factor. , people would take too expensive” the rate: probably I) C" H C 0 rf ”If I had too lavish a J one look at it and say, lThat~ Let°s drive on to a place whe wongt be so high 3" (T) m (T) I This owneris comment could be pertinent to precisely the unfortunate situation in which tre motel oesrr12ed above is now enmeshed. 1;W¥Tlh? werrszw*at were 3” d [0' O y.” ('1‘ T {ac m (D c + C 1,). <1 b I ‘ ) CQ 3 (‘1‘ (—O 3.55 :90 th D U) 0U I“ (3 (T) ( s of funds for inveetgng in the motels‘ ari what portion of these funds was sipplied bv longwterm inw debtednessu In motel financing} Eh: funds for the financing of . The owner who puts in Ff the motel are supplied in part by 86 funds in the form of equity capital. Funds are supplied by long—term debt whereby assets (usually the building) are pledged in the form of a mortgage on specific property. Working capital is usually supplied partially by equity capital and partially by the extension of credit by the various firms selling to the motels.' The following analy- sis concerns itself primarily with that portion of long- term debt that is supplied by a mortgage on the physical property of the motel. There may be additional forms of long-term debt. Usually, however, long-term debt takes the form of specific assets being pledged for the funds obtained. This is usually in the form of a first mort- gage on the motel property. Sources of Funds Question 34. Mailed responses. (68) 1 Most of the funds for purchasing the motel came from: Mortgage firm.. ................ 32 Proprietorship ......... . ........ 12 Owner 50% - mortgage firm 50%.............. ........ lO Partnership .................... 6 Blank .......................... 5 Stockholders ................... 3 1The word "money" was used in the mailed and inter— view questionnaires to make sure the questions were absolutely clear to those who participated. Questions have been restated in financial terms. Financial Management (2d ed., Boston, Allyn and Bacon, Inc., 1963) by Robert Johnson was used as the reference for financial terms in this study. 87 Question 44. Interview responses. (30) Most of the funds for purchasing the motel came from: Mortgage firm..................l6 Owner 50% - mortgage firm 50%..................... Not sure................. ..... Stockholders................... Proprietorship...... l»—-’f\)\fiO\ O O O O O O O O O O 0 When this question was asked during one interview, 1) the manager replied, "There we no mortgage debt. The r ’ up. ~‘ w owner paid cash for this motel ” The interviewer, by personal observation, estimated the cost of this motel to be over $500,000. The owner put in eighty per cent of the funds himself, it was learned, and obtained the rec maining twenty per cent from friends. Several of the managers interviewed were not sure of the amount of the mortgage debt or where it was ob- tained. This will hold true in many of the answers to the following questions. In many cases, hired managers were not informed about the motelis financial matters. In some cases they did not receive financial statements or any accounting information, which did not permit trem to use accounting knowledge in the analysis of their motel for control of operating expenses. This appeared to be the case more often in the larger establishments which were more apt to have hired managers. An owner was more likely to manage his smaller size motel himself. The owner was more knowledge 2b; finance and contributed more formation to thi” Question 35. Approximately what percentage of purchase pr capital and what percentage was m: rt ga .g deb Equity cacital l00%....._ Mortgage Equity capital 20%...... .M‘rtgage Median: Equity capita‘ 40%. iortgage Question 47. Interview reaan ses. {30} Apprcxi its}? what percentage of purchase pr capi*ai and What percentage was mortgaxe deb Equity capital 100%.. ,..Mortgage EqUity capital 10%. .... Mortgage Median: Eqaity capital 50%.......Mortsage The tabulation of the answers to ques SEVEN printe State University study. N L. Mailed responses e in matter financial and of accounting and accounting inn debt 0% debt 80% debt 60% t' ‘) ('D U) (D (.‘f Li; a H- debt 0% debt 90% debt 50% asked on the int-rview questionnaire is as follows: umber of EEJ‘Cent of Motelsf M rtsage Debt 7.. ... . .not sure 6 o o 0 I o 50% u 4 I, I b 9 a :),'g 3 n J 1 o o o o o ,. o u o a o 7 BC/fi 3 o o o o o c o o a o 70,35 2 ~‘ 3 C C " C o C: c o O J o .v {j 0% 2? l.- & o 0 C G O L w J ‘ 0g; 1.. . .... ..... . 90% l e n e h (‘ L',‘ n o o '9 o ---------- o o 25% 1 a. 3 O O 3) ‘ O 0 v 0 O 0 0 D O O C 0 F O f 20% The following comments are wuored fr(m a series of d lectures delivered by Mr. Fr d w. Eckert at Michigan in 1963. 89 "The chain companies have used their corporate -guarantee of individual property mortgage loans by becoming the direct obligator on the mortgage loan notes, or guaranteeing the notes of subsidi» aries who are the direct borrowers, to obtain the higher loan amounts and the more advantageous terms. Borrowing ratios of mortgage loans have thus increased to initial ratios of sixty five or even seventy per cent of cost or fair market value. However, the overall ratio relationship of morte gage debt to property value is expected to be held to fifty per cent in order to insure a margin of safety in the overall corporate position." According to Mr. Eckert, mortgage debt should be held to fifty per cent of the fair value of the property to insure a margin of safety- The median of motels inm terviewed did conform to this safety pattern. Some were probably held to this fifty per cent longwterm indebtedness by their bankers. Others were able to obtain a greater percentage of mortgage funds and did so. It was calculated that the median motel of the (I) mailed study could conceivably on t a total of $144,900. If the owner is to supply fifty per cent of this amount, he must invest $72,450. The next sch in the study was to find out where men Who inveSted in the motel basaress cr~ tained the funds for their equity. 8. (30') Question 46. Interview response for the down payment by owret, What was the source of funds ...-exp-m-chw saw-<- .- u-uu .4 p .13 L-xr. - 1Fred W. Eckert, "Financial Management for the Service Industries: Lecture 6; Capital Markets for the Service Industries," 1963. 90 Savings or other businesses....23 Chain........ooo.o............. 5 Inheritance.................... 2 Only two owners inherited the funds they used for entering the motel business, and these two owners had previous business experience. One of these two had man“ aged a large hotel. The other had been engaged in sales work for a large firm (not hotel or motel). Twentymthree answered "savings" which were usually accumulated through their activities in other businesses or fields. Only three of these twentymthree said they had worked on a salaried basis for a business organization prior to their entry into the motel business. Five of the thirty inc terviewed motels were owned by chain concerns. (A more complete analysis of the business experience of the motel owners appears in Chapter V of this study). All of the o;iated With U) owners (excluding chain motels) had been a: previous business operations In the majority of small and large operations the motel investment funds had come either as profits from another business or from sale of a previous business or businesses. Question 36. Mailed responses. {68) Who holds the mortgage. Bank. I O O O 0 O O 0 CI 0 C O 0 C “J 0 O (J O D O 6 O O O O 29 Private individual.............14 NO mortgage I O 0 G O O 0 c. 0 0 0 G 0 O 9 C) O O 0 0 lo 91 Insurance company.. ..... .......9 Savings and loan...............4 S.B.A. ........................l Blank..........................l Question 48. Interview responses. (30) Who holds or held the mortgage. Bank...................... ..... 9 Insurance company.... ........... 7 Mortgage company... . ..... ...5 No mortgage....................3 Land contract............... ...... 2 Not sure ..... ...... ......... .2 S.B.A. ............ .. ........l Pension fund............ ....... 1 Interviews disclosed the relatively lesser extent of importance of the bank as the motells mortgage holder. This situation is not illogical in view of the fact that the interviewed motels were predominantly located in larger size Michigan communities. In the larger communim ties funds were probably available through sources other than the banks. Thus the position of banks as the motelfs creditor diminished relatively in proportion. In addition to the above, many firms engaged in placing mortgage funds, such as the insurance companies. are not very interested in placing small loans. They usually prefer to place larger amounts because of the cost of processing loans. Secondly, many small banks do not like to tie up their funds in too large a single mortgage for extended periods of time. 92 It is interesting to note that the mortgage debt was held by private individuals in fourteen of the rem plies to the mailed questionnaire, wnereas no mortgage debt was held by private individuals in the interviewed motels. Where private individuals did hold the motelgs mortgage debt, it was ge t erally for the mailer motels located in the smaller communities. Question 37. Mailed respons What is the rate of interest on your mo telis mortgage. LC IA! 0 c .1 o 3 r '- g 'u o o r : v - t ~l ' ' \~ ' ‘ u ' E“ 70 H i g; 1 I o e C2 u c a , c v , r C: 9 “ ’ 0 3 5 ‘ 7 ' 5% MG d i an .3 C (- ‘- 0 O 7' O O T L. I ‘- r v ‘ " T L C) O C! 4“ I 6 F‘ 0% Question 49. Interview responses (30) What is th rate of irterest cn yc r mote s mortgage LOW 0 O O O O O .‘ O D C o J O c f .) ;. N 0 q. s ,-_ 3 O 0 £2 0 u% Hi Eh 0 O I o o o r) O o o o o a o a o ) 3 :3 o O o O o I o l 0% Me d i an O 3 C' O i O O O O. O D K: { ., .'. 3 0 5 I) 0 J O O 9 6% Most of the motels ww thirtv~seven of the mailed and thirteen cf the irterviewad v: paid Lac meozan 1r» terest rate of six per cent on their m:rtsages, The low of four per cent which appeared cm the interview ques~ (T) tionn ire was the aboveum ntioned s.B.A. loan. The owrer :1) who had the ten per cent n:rtg age interest rate was asaed, When he was interviewed, why he had to pay ten per cent. He replied: "Ten per cent is very high. At the time we built, we wanted all the mortgage funds we could get. We wanted to put in the least amount Cf funds possible. (They had a ninety per cent mortgage.) 93 Consequently, we had to pay high interest. We have built up our equity sufficiently to where we are now in the process of refinancing." Most of the mortgages were standard business arm rangements. The smaller establishments tended to deal through banks and the larger motels through insurance com- panies or mortgage firms. The smallest motel where an insurance company held the mortgage was thirty units in size. Five of the seven mortgages held by insurance companies were for motels one hundred four units or larger in size. Question 38. Mailed responses (68) What was the original length of time for the mortgage in years. * Low.............. ............. 7 High................. .......... 2O Median.........................12 Number of . Years for Motels Mgéiiflfifi; 8 ..................... . ......... 15wl9 8............ ...... ............,.10w14 8.........,........-.... ........ not sure 3 ........................ .... ..... 20 and over 2 ....... ............ ..... ......no mortgage l..................... . .... .less than 10 (No mortgage: 1 leased, l paid cash.) During interviews it was asked why a few of the motels had only a ten—year mortgage. This owner’s res— ponse is typical: "We wanted a short time to get it paid off. Ben sides, the bank didn't like to go over ten years." In general, the smaller motels had higher interest rates and shorter time periods for their mortgages. Question 39. Mailed responses. (68) Does interest plus principal equal a flat, constant monthly sum. yes. 0 O O O 0 ° 00000 0 O O 0 O O 0 0 0 O O 0 O O O 049 other. 0 O O O 0 0 O 0 O 00000 0 000000 O O O .12 NO. 0 0 O O O O 0 O 0 0 000000000 0 00000000 A Not sure............ ........... 1 (Other: varied from single annual interest and principal payments to monthly interest and principal pay- ments.) Although this question was not explicitly asked in the interviews, a few owner/managers volunteered the in- formation that they paid principal and interest as a flat, constant monthly sum. One specified: "I pay monthly interest on the building. I have a land contract with the owner where no principal is due for twenty years. The owner of the land contract felt this was a good investment." Question 40. Mailed responses. (68) Was there a second mortgage on your motel. NO 0 e o o o o o o o o o a o r! o o o e o v.» 0 a r» o . a '3 a o 55 Yes ..................... .......ll Not sure....................... 2 Question 51. Interview responses. (30) Was there a second mortgage on your motel. NO . ° C O o 0 0 C 0000000 0 O O O 0000000000 20 Yes 00000 O 0 0 O O 0 0 O O O 000000 O 000000 8 NOt Sure 00000 o o o 9 ooooooooooooo I o 2 Two individuals interviewed said their second mortm gages were used only for temporary financing until they could arrange their permanent financing. One owner stated: 95 "It's part of the down payment deal. We have a three-year second mortgage." Question 41. Mailed responses. (68) Was a second mortgage used to finance the purchase of furniture and fixtures. No....... ...................... 56 Yes... ..... . ................... 8 Not sure ............... . ....... 3 Blank.. . ...................... 1 Question 52. Interview responses. (30) Was a second mortgage used to finance the purchase of furniture and fixtures. No ............................. 24 Yes ........................ .... 5 Not sure ....... ..... ........... 1 "Compared with the terms for a first mortgage, secondary financing is usually obtained at a higher rate of interest and is repaid over a shorter length of time, usually not longer than five years...It is often deemed feasible to finance furniture, furnishings, an equipment on an installment contract basis." Few of the motels ~~ in either the mailed question~ naire or the interview phase of this study ~~ used a second mortgage to finance their motels or to purchase furniture and fixtures. One motel owner stated: "We did not use a second mortgage for purchasing of furniture and fixtures. We paid cash for all our furniture and fixtures. My partners and I each obtained funds from our bank on a personal loan basis. We used these funds for buying furniw ture and fixtures. Itls amazing what you can buy and the prices you can get when you say 'I intend to pay cash for this.‘" 61George O. Podd and John D. Lesure, loc. cit., p. 19 . 96 Of the motels interviewed, nine of the thirty had long term debt in the form of mortgages which supplied seventy per cent or more of the purchase price. Seven managers were not sure what was the mortgage debt relam tionship to the purchase price. Fourteen motels out of thirty interviewed had mortgage debt of fifty per cent or less in relation to purchase price. The nine motels tried to use high financial leverage where they borrow funds at a given per cent and attempt to earn a return on these funds higher than the cost. In the past, some motels {and this is especially true for hotels) have encountered difficulty in meeting the fixed charges that resulted from an overburden of debt. If they experienced a decline in occupancy, they usually had difficulty meeting their fixed charges. It can be stated here that the majority of Michigan motels included in this study conform to the recommended procedure of avoiding an overbucdcn of debt. magma Question 42. Mailed responses. (68) Is the property leased. No.............. ............... 62 Yes............................ 4 Blank ........ ........ .......... 2 Not sure .................. . ..... O Question 42a. Mailed responses. (Concerns only the 4 who answered "yes" to question 42 mailed.) By whom is the property leased. 97 Motel operating company leases land & buildings & equipment from owner. ........ . ......... 3 Private restaurant operator leases restaurant from motel....l Question 53. Interview responses. (Concerns only the 7 who answered "yes" to ques~ tion 53 interview.) By whom is the property leased. Motel owner leases land from land owner ...................... 2 Restaura.nt operating company leases restaurant from motel....2 Oil company leases land from motel ...................... 1 Motel operating company leases entire facility from motel owner .................... 1 Motel leases land & building from owner but provides own furni- ture & fixtures.... ............. 1 In addition to the seven who replied "yes" to question 53 interview, one owner stated that the land had originally been leased from the land owner by the motel owners, but that since then the motel owners had purchased the land. Question 43. Mailed responses. (68) If the property is leased, is it leased by a sale leaseback. No ............ . ....... . . ..64 Blank ........... . ........ . . . 4 Not sure........ ................ 0 Yes............... ..... ........ 0 Question 54. Interview responses. (30 If the property is leased, is it leased by a sale leaseback. No OOOOOOOOOOOOOOOOOOOOOOOO 0 o I o o 29 Not sure..... ............... ... 1 yes ..... o 0000000000000 0 00000000 0 (Not sure: the respondent thought not.) 98 The sale leaseback technique has been used by a few motels as a means of raising money for motel con- struction. A sale leaseback is defined by Mr. Stephen W. Brener as follows: "A sale leaseback is a transfer of title of the furniture, fixtures, and real property without a change in management. Usually, an investment group purchases from an owner—operator and upon taking of title, leases back the operation of the hotel to the former owners. In a sale and lease, the buyer makes an outright purchase of the prop- erty and the operation; he then leases the operam tion to an outside tenant. In sale leaseback the seller and tenant are the same; the owner sells the property to the investment group and immediately assumes a lease on the operation of the business."1 The preceding description applies to the motel. A‘ purpose of this study was to determine if the sale lease» back might be a common form of obtaining sufficient funds for the financing of Michigan motels in the study. The above responses to questions fortymthree mailed and fifty- four interview disclose that in no instance was the sale leaseback technique employed by a Michigan motel studied. "Generally it is conceded that capital funds ob» tained by the sale and leaseback group will rep- resent highwcost capital to the seller initiator of the transaction." This statement by Mr. Fred W. Eckert points out that the sale leaseback is an expensive method of financing. 1Stephen W. Brener, "Lifting the Fog on the Sale Leaseback," Hotel Management, (April, 1957). 2Fred W. Eckert, loc. cit., "Lecture 7; The Lease and the Sale and Leaseback.” 99 It can be assumed that some of the larger motel owners were astute enough to realize that such financing would be costly. Perhaps, too, sale leaseback was not available to the small operators as a method of financing their motels. If it were available, they may not have thought of it or known about it. Investment Question 44. Mailed reSponses. (68) Do you have a financial investment in the motel. Yes ................ ... ......... 47 Blank ........... ...... ......... 15 No ............................. 6 The above illustrates one pattern which has emerged through the mailed questionnaire. The mailed questionnaire was answered in the main by owners of small (less than fifty rooms) motels. Many of these men own their motels and manage them themselves. The owner and active manager of the typical mailed questionnaire motel is in most cases one and the same man. Question 45. Interview-responses. (30) Why did the owners invest in motels instead of other in— vestments. The following varieties of answers are indicative of those received in reply to the above question: Expected an above—average return .......... 8 Motel business appeared profitable ........ 4 Built as an investment .................... 3 Was in hotel or motel business before ..... 3 Saw potential in a poor operation ......... 2 Built motel to complement restaurant ...... 2 lOO Thought it was an easy business ........... 1 ‘Too young to retire............... .. .....1 Thought limited knowledge all needed. ..... 1 Had a survey taken for property ........... 1 At least eighteen of the above replies indicate that the owner's entry in to motelkeeping was made based upon a well-thought-out plan. At least three other owners' responses show that they were well aware of many zaSpects of the motel industry when they entered it. The above answers are typical types of replies re- ceived to the question. "Because of the risk involved, a purchaser of an equity interest in a motel or motor hotel would probably expect a return of ten per cent to fif- teen per cent on his money, plus some assurance of the safety of principal until it is fully repaid." ‘ A large number of the respondents stated that they fuad entered the motel business because they expected an atmove-average return on their investment. One manager Stated: "The owner had a large plot of land. He wasn't sure what to do with it. He had a survey taken as to its best use. The answer came back that the property was ideally suited for a motel.. The owner built a medium-size motel on the property (and paid cash for it) and the motel has been very successful." A motel owner stated: 1George 0. Podd and John D. Lesure, loc. cit., p. 187. 101 "We were considering various investments -- bowling alleys, restaurant and cocktail lounge, or nursing homes. Bowling has declined in popularity and nursing homes can expect greater state and federal control, so I settled on a motel as a method of in— vestment. I found a place in rather bad shape, doing no business, but a place that had a potential, so I invested in a motel as opposed to the other businesses I was considering." One owner said: "I thought it was kind of an easy business but have found out otherwise. I used to drive by a motel and always saw the owner out front taking it easy. A big problem is that you‘re stuck with it twenty- four hours a day." The most prevalent answer was to the effect of: "The motel was built as an investment. I saw a pom tential for a good return.” The above answers indicate varied reasons for enterw 111g the motel business. The majority of the replies re- ceived stated that the owners considered other businesses (Ir were engaged in other businesses prior to entering the UKDtel business. They entered the motel business as a Ilivelihood and for investment purposes. Most entered with foresight and after investigation of the type of investment ixito which they were venturing. They entered forearmed 'With their previously acquired business knowledge and exm perience. Question 68. Mailed responses. (68) What do you feel is an adequate return on motel investment. Low ........................... 5% High .......................... 25% Median ........................ 15% 102 Number of Return on Motels Investment 25 ............................. 15% 22 ............................. 10% 9 ............................. blank 7 ............................. 20% 2 ............................. 8% l ............................. 25% 1 ............................. 7% 1 ............................. 5% Question 57. Interview responses. (30) What do you really feel is an adequate return on motel investment. Low ............................ 10% High ........................... 30% Median ......... . ............... 12% Number of Return on Motels Investment ll ............................. lO% 7............... ..... . ..... ...not sure 6 ............................. 15% 4 ............................. 12% l ............. . .......... . .30% l ............................. 20% In their book, Planning and Operating Motels and Motor Hotels, George 0. Podd and John D. Lesure have stated that a return of ten to fifteen per cent can be expected on motel investment.1 The median answers to the two questionnaires -- fifteen per cent on the mailed and twelve per cent on the interview -- are within the range advocated by Podd and Lesure. lIbid. 103 The seven interviewed who stated that they were "not sure" were in all cases hired managers. One man- ager interviewed replied: "I'm not sure. I‘d be happy if I made a good living. But I don't think I would invest in a motel." Question 67. Mailed responses. (68) Is the motel earning an adequate returr on the owner‘s investment. Y e S O . 0 U 0 3 C Q L J O i) 0 O O 3 R J 1‘ ’3 3 c J 0 3 I O I LL 4 1 A N O <- 0 O 0 C (' 0 L) C ' 9 I 9 O .' 'V O Q 1 C O -'3 J O 0 C 3‘ ~' 0 O -L NO 13 S [J A e D Q 0 (a n 3 O C/ C v‘- 0 O O L: O ’J O O O 5 0 u‘ 5 E " n k 4 -‘L a A , — v.- 0 '3 5‘ n Q 0 O J O h 0 Q :7 C K 4 fl '.- U 9 O D 3 ) 0 Question 58. Interview responses, (30) Is the motel earning an adequate return on the owner‘s investment. x - Q i e S O O O J O J O U 0 O U 0 9 O 3 Q d O OOOOOOOO C & NO 0 O 0 O O O O O O 0 O O O O O O O 0 O O O O 0 O O O O O Donet know..................... H O‘\ 80 Most of the respondents to the mailed questionnaire did not offer any comment on this question. One of the respondents who answered "no," h;s mczei was not earnirg an adequate return, stated: "I have an older, smaller {less than fifty rooms) motel. A few years ago I contemplated redeco- rating and upgrading my motel. At the time I really didn‘t think it was necessary. Instead i spent the money and used my credit on something else. Now I do need to upgrade my establishment and I no longer have a line of credit available to me. The bank has been wonderful and it's no fault of theirs. It was just a case of poor judgment on my part.” 104 Profit ___a—u—g-fi Question 58. Mailed responses. (68) Is the motel currently operating at a profit. [T yes 0 o c o c o o o o o 0 o o o o u o a o e o o o a ) c '4 o )6 NO I O O 9 O O o o O 0 O 0 o o c o v o 2 a) o o c s I o o o a 10 B 1 a n k 0 0 O O O O O O O O B 0 0 O 0 O ( C C ._. 0 a J O O 2 Question 59. Interview respo ms s. (30) Is the motel currently operatirg at a profit I e S I t‘ O . 1‘ a- c l I O t‘ C O O L; I L‘ ! '_' ’\ ¢ ' f 0 O O J ;N .2 Fl 0 O O ’3 ) a a O 0 4) t? O . = t‘ 0 0 O K 0 ~'. 0 U ‘. 0 a 0 a 9 O 6 N O t S u re 0 O 9 0 8 (I 2 3," 0 U (I C h‘ L' O L O L‘ '- 0 s! 1 O 1 Question 55 Mailed responses (68) Is tn re a profit before deprec ciation. Y” e S U n‘ O O -.) U Q 0 O 0 .1 O O 6 ' \: J u o .i 2‘ J O 5- G LL 7 B l a. n k D u 0 0 .3 G (‘ 0 O O O C 0 O O T C O 0 O C O {a U 6 O l u N O O O O O O O O O O I O O O O 0 l‘ :- 9 Q 6 O O O 3 O O O -B '3 7 The above question was asked to determine if some operations which did not ear n a net profit after taxes might earn a profit before depreciation. Some motel owners have used a form of accelerated depreciation to decrease the amount of income on which they would have to pay taxes. The depreciation expense is not an ex~ pense paid by the firm. This allows the firm to have greater cash flow which is defined as operating income less those items for which cash 18 actually paid. The motel business is a heavy fixed asset business. The non- cash deduction from income for depreciation is frequently greater than the profit after income taxes. However, the profit before the deduction for depreciation 105 must be equal to or greater than the amount of deprecia~ tion in order for this profit to be a positive factor in cash flow computationu In the past some motel owners operated their motels for a number of years, charged off (via accelerated methods) the maximum depreciat1ont and then sold their motels. When the motel was sold, it qualified for org term capital gains tax rates, Prior to toe l904 re- vision, "the taxpayer got the benefit of the long term gains deduction and the tax could not exceed ’n-‘ capital ‘7) twentymfive per centf”a Thus under l96u tax law for the owner to qualify for a twentwaive per cent maximum capiw tal gains tax rate, the motel had to have been owned by the same owner for over ten years. The 1964 tax law states that owners may not use accelerated depreciation for a few years and then sell their property and pay a maximum of twentwaive per cent of the gain on the sale of their m;t:;. They still may. however, use accelerated depreciation to increase tieir expenses, decrease their taxable income, and increase the;; cash flow, An important consideration often overlooked by ____ —- ...a.-i.- ..r 1William A. Paton, "The 'CasheFlcwi Tllusion," 2W9 Accounting Review, (April, 1963), p. 243, 2Federal Tax Course 19§9'(Englewood Cliffs, New Jersey: PrenticewHall, 1959}, p” 1623. 106 some motel owners is that the profit before depreciation must be equal to or greater than the amount of deprecia— tion for them to realize the maximum cash flow from this method. Question 69. Mailed responses. (68) Which of the following do you really believe should be the profit percentage of the sales dollar. Low ..................... . ........ 5% High ............................ 25% Median ......... . ............... 15% Number of Profit Motels Percentage 28.............................2o% 18 ...... . ...................... 10% 17 ............................. blank 4 ...... . . . . . ... ....... . 7% 3 . ........................ 15% 2. . .. ........ . ............. 25% 2 ....... . . . .............. 5% Horwath and Horwath state: "Net profit before income taxes as a ratio to total sales for a motel without an operated re~ taurant was 5.9%; those motels with an operated restaurant had a net profit before income taxes of 5.1%.“ Question sixty—nine mailed was asked because ratios to total sales is a common yardstick for evaluating the operation of hotels and motels. Annual studies have been compiled for thirty~two years on hotels and for eight years on motor hotels by Horwath and Horwath. Annual 1John D. Lesure and Eugene H. Lott, "Motor Hotel Operations in 1963," The Horwath Accountant, (Vol. uu, N0. 4, 1964), p. 3. ‘ 107 studies have been completed by Harris, Kerr, Forster and Company for twenty-seven years on hotels. All of these studies use percentage relationships to total sales as a means of evaluating hotel and motel operating results. It is not known if motels in Michigan are actually receiving the above percentage of sales. The vast majority of the motel owner/managers who responded by mail stated that they were receiving an adequate return which implies that they are earning what they feel is an adequate profit. Their median idea of what should be the profit percentage of the sales dollar was fifteen per cent, which is approximately three times the national motel average received. It can be generally concluded here that the motels which responded to the mailed questionnaire are receiving an above-average profit as compared with the national trend -— even when it is taken into account that a few motels Studied were operating at a loss. Question 65. Mailed responses. (68) Are employees informed as to whether or not the operation is profitable. No ............................. 43 Yes ............................ 24 Blank .......................... 1 Question 37. Interview responses. (30) Are employees informed as to whether or not the operation is profitable. No ................ . ............ 20 Yes ......... . .................. lO 108 Question sixty-five asked on the mailed question- naire and question thirty-seven asked on the interview questionnaire were asked in an effort to determine how well management kept their employees informed about the operation's profitability. No valid, overall statis— tical breakdown on this matter was feasible, but it can be stated that in general the owner/managers who did in~ form their staffs of the financial status of the motel appeared to be more progressive in this as well as in other aspects of their conducting of their motel opera» tions. Two managers stated that their employees received bonuses predicated upon profits. Working Capital Question 60a. Interview responses. (30) Has the motel ever been pressed for cash. No ............................. 19 Yes ............................ 10 Blank ....... ................... 1 This question had not been planned for inclusion on the interview questionnaire and was not asked during the first interview. During the second interview, however, the owner/manager volunteered the information that his motel had been "pressed for cash." The question was asked during the remaining interviews. The owners and managers were very frank in their replies: 109 "Yes, during slack periods, due to lack of business. This may turn out to be chronic. However, it wouldn't have to be.” "We have not been pressed for cash since the pre~ vious manager left. The previous manager took money and robbed the place blind." One final comment highlights a problem of one owner chronically pressed for cash. "I have been pressed for cash many, many times. I have always been able to talk creditors into being lenient and have been able to pay them.. However I have not been able to get understanding from state and federal governments. The government is very discouraging. It requires many forms that only an expert would understand, One is forced to keep employees on just to keep up With govern~ ment forms. I realize wny many peoole get out of business. The government is very discouraging. The government man said if I did-not pay the taxes they would close this place; I said go ahead. If you close the place you will never get your money and you will force all of these employees out of work and onto government unemployment.- Instead of their paying their taxes to you, you'll be paying them. You are being very ridiculous. His boss, the tax man, came around and I was able to work it out. Iim still open." The following comment came during an interview at a large motel. "Right at the beginning we were pressed for cash. We did not do any volume of business. It took time to establish a clientele, but we haven t had any problem since. It was a problem of inadequate working capital. What they should do is charge $1,100 instead of $1,000 for a block of stock. Then if the $100 isn9t needed, give it back. live never known anyone to refuse money." All of the motels interviewed were able to work out their particular problems of being pressed for cash. Only the one motel (with the government trouble) experienced real difficulty. A few of the others stated that they had lacked funds during remodeling or were unable to replace furniture the way they would like because of a shortage of funds. Occupancy Question 12. Mailed responses. (68) What is percentage of occupancy. (Total annual rooms 0cm cupied divided by total annual rooms available for sale.) Low.............. .............. 30% High ......... ....................93% Median......... ................ 70% Number of Percentage of Motels ”_0ccupancy 13......................... ..... 66% ~ 70% 12.... ......................... 60% - 65% 9....‘ ......................... 76% - 80% 7................ ............. 50% - 59% 6 .......... ............. ...... 81% - 90% 6...................... ....... blank 5 ..... ............. ....... .....71% a 75% 5............................. 0% ~ 39% 4.................. ..... .......40% - “9% 1 ........... ..... ...... ........91% - 100% Question 41. Interview reSpOrses. (30) What is the percentage of occupancy. ( Total annual rooms occupied divided by total annual rooms available for sale J Low...................... ....... 40% High..... ... ...... . ..... . ....... 90% Median................... ...... 78% Number of Percentage of Motels Occupancy 11......................... ..... 80% - 89% 9................ ........ _ ....... 70% - 79% 6............. ................. 60% ~ 69% 111 2 .............................. not sure 1 .............................. 90% — 100% l....... ................... ....u0% m 49% "not sure” The two interviewed who stated they were did, however, estimate answers. One said his winter occun pancy was probably in the high fifties and over eighty per cent in June and July. The other estimated a ninetym eight per cent occupancy during the summer. The higher occupancies were generally in large, new, affiliated motels located on or near major highways. The motels with lower occupancies were in general the smaller, older establishments. There were a few exceptions in both cases. Motels not located on major highways had, in general, an overall lower occupancy. Horwath and Horwath, in their Eighth Annual Motor Hotel Study, show 69.8% occupancy for those motels which include a retaurant, and 70.U% for motels without a restaurant. The selected Michigan motels compare favorably with the national occupancy average. The median of the mailed questionnaire occupancy (70%) is comparable to the national occupancies compiled by Horwath and Horwath. The occupancy median for interviewed motels was 78%. lIbid. 112 Rates Question 13. Mailed responses. (68) What is average rate per room available for sale. (Total annual rooms income divided by total rooms available for sale.) Low ............................ $ 3.12 High ........................... 11.25 Median .............. . ........... 7.19 Number of Average Rate Motels _*Per_Room 24 .................. ............blank 12 ............................. $ 6.00 - $ 6.99 6............. ................ 8.00 - 8.99 5... . ................. ...... 9.00 m 9.99 5... ........... . .............. 7.00 - 7.99 4........... ......... . ......... 11.00 and more 4..................,...... ...... $10.00 - $10.99 4...... ..... . .......... .. .... 3.00 _ 3.99 3.......... ........ . ............. 5.00 - 5.99 1.... .............. ............ 4.00 - 4.99 The technique of dividing total annual rooms income by total rooms available for sale is a yardstick used by some motels to compute the income received from each room throughout the year. Question 14. Mailed responses. (68) What is average rate per room occupied, (Total rooms ln~ come divided by total rooms occupied.) Low............................$ 4.00 High ....... ..... ..... . ......... 14.00 Median............. ......... ... 9.51 Number of Average Rate Per Motels _Room Occupied l9 .............................. blank 12 ............................. $ 9.00 - $ 9.99 11 ............................. 10.00 _ 10.99 9 ............................. 8.00 - 8.99 5 .................. ........ ..... 7.00 - 7.99 113 3.............................il3.00 and more 3 . ,. . . .. 12 00 - $12 99 3............................. 6.00 ~ 6.99 2.......................-..-.. 11.00 - 11 99 l 4 K‘ 0.00 - a? Question 43. Interview responses. (30) . What is average rate per room ocolpjed. {Total rooms income divided by total rooms occupied.) as R) LO W o o a e o o o c :3 ~ :3 ..» c a a o ccccc v , I o H i I I l; J- '-\l 1. e n v. c o , a > a. .- o oooooooo , -- , » ‘ o r‘ A o __J I Median u - C - t " 1‘ c t. ‘ 7. . " ‘ ______ L 0 O J U |\) 01 \fl LA) CI Number of Average Rate Per otels Room Occupied r—..—-v-a.-—.p— -— v-—.n.-.-.-—. “An. -—-.—-~=-—.--— -..—..-n- m—"v- .. . a—r. . . /‘\ ‘ f. .‘ ,\~ I . .H o C» - on .A x. .. .. c r c c ’ u c v . I. a J O O " ' ’ 0 ‘ .' . "J x’ J r ( 34‘ (< i A ‘ (I ,~ ‘ . - ) 4, Q . L . .‘ , , a - n * 9 \ T t‘ I .' I A \J CD‘ 00 w 0.9 00 .—1 10 £43) .00 - 11.99 .-.. ..._. .. ... . . .. .. 00 and more ....................... .....$ 7.00 w $ 7.99 b in: O x ‘I G G S 0 ~ ¢ i o o o o a u 1 o ; [U [\D JTT-‘ Mai—1 101—4 The medians of the two groups studied are compara h) mailed - $9.51, interview - $9.3 _ These rates are n0t, J however, as high as the medi-n verage rate per room oc~ o) cupied of motels studied by Horwath and Horwaim. in 12c Horwath and Horwath Study, the motel w1th a restaurant had an average rate of $11.29. T ":c I;‘K.ui restaurants r11 . 1 an average rate of $10.98. I) I\_A) 6) \/ Question 42. Interview responses. 1 What is your rate schedule. Single Double Twin Low......... .... ..$ 6.00.......$ 7.50... .,_s 9.00 High................ 10.00.......’14.00....*.. 18 00 Median.............. 8 00.... .. 10.00.. -... 12 00 u"| -<—....--.-.‘_-._-.. ..n,_...u—H. 4 . ..q-. .~.-.- _._...._-- H _..--.—...— --—.,.. . __. . --. H .. -. 119.153.” p- u 114 "Back in 1932 a traveler could stay overnight in a motel for $1.00 to $2.50. Few motels dared charge as much as $3.00. Today it is not uncommon for bigwcity motels to charge up to $40.00 a day for suites and $20.00 for single rooms." The above tabulation shows the range of rates being charged for rooms at the Michigan motels interviewed. In addition to the above rates, many of the motels charged $2.00 extra for each additional person in the same room. Several motels had a minimum rate which they charged for one person regardless of the type of accommodations occupied. Only two operations of the thirty interviewed gave any indication they might use varying room rates depending upon the individual guest. These two were smaller, older establishments, and the answers they gave to the question were somewhat vague and not conclusive. Most of the establishments consistently employed a set, definite rate schedule. Einancial Statements .’ (’\. y 1 Question 45. Mailed responses. {00 Approximately how much average time per day does the man~ ager spend on accounting and financial matters. 1 to 2 hours..... ...... .. ....... 26 Less than 1 hour.......... ...... 24 2 to 3 hours............ ....... 8 Blank ........................... 8 More than 3 hours .............. 2 These answers were in accord with answers to queStion seventy-three mailed. In replying to question seventymthree lThe Lansing State Journal, (Mon., Aug. 10, 1964), p. A.2 115 mailed, owner/managers stated that they spent a considerable part of their day working on daily operating problems. Based on this, it would not be expected that they would spend a great deal of time on accounting and financial mate ters except in requisite daily aspects of these operational phases. Although this question was not asked during the in~ terviews, several owner/managers volunteered that they kept limited acccunting records themselves. Questinn 56. Mailed responses. (68) Who prepares the finanCial statements. Accountant......... .-...... ..5 0 Wm e r .3 c o O 0 0 U 0 O 0 0 O J G o f‘ L‘ O \J L“ II) C -'. O I l B 1 a n k 0 O II 0 0 L) 0 U 0 U 0 ‘, u 0 '1 >1 ‘ In »' u 0 .l O I Managv o o o o o o o o o n o o c s o o .1 u o o o c o n otherc o o 0 o 0 o o o c o o n u c c o a a u o e o o o u OOTL‘IUW It should be noted here that the great majority of the respondents employed an accountant to prepare firanria; statements. Not one motel replied that a manager was -es~ f I”) ponsible for the task. In view of the ccmments of manager elsewhere in the study, however, it should be mentioned that some managers did keep general books which the owrcr or accountant used in preparing the financial statements. Question 57. Mailed responsest (68) How often are financial statements prepared. Monthly........................30 Once a year....................25 Other..........................10 B1ank........................,. 3 116 (Other: quarterly 6, twice a year 3, when applying for a loan 1.) Question 61. Mailed responses. (68) Do you apply the knowledge gained from financial statements to daily operating decisions. Always.........................26 Frequently.....................23 Sometimes.................-..,110 Seldom... ......... .. 7 B1ank................. 2 Never.......n.. 0 Replies to questions fifty seven and sixty one mailed reveal limited discrepancy of answers. This is one of the very few instances of even slight inconsistency of reply in the entire study, Forty nine owner/managers replied to question sixty~one mailed that they "always” or "frequently" applied knowledge gained from finanCial statements to daily operating problems, but only thirty of the respondents mentioned that monthly financial state; ments were prepared at their motels. It might be core sidered somewhat questionable how effective their reference to a yearly financial statement would be in making daily operating decisions. Accounting Practices Question 66. Mailed responses. (68) Do you have a fullutime accountant, partmtime accountant, or no accountant. Partetime accountant...........35 Full-time accountant . ..... ..23 No accountant... . . .... ... 9 B1ank....................-. l 117 Fifty~eight of the sixtyweight establishments em- ployed accountants. To question fixtymsix mailed, twelve owners replied that they, the owners, prepared the fi~ nancial statements. This comparison indicates that some of the motels answering question sixty~six mailed may have employed an accountant primarily or solely for in~ come tax purposes. Question 64. Mailed responses. (68) Is your motel audited by a Certified Public Accountant: Y 8 ~: . l r - a \ o ‘ «‘ u v. . w o o o v s e . i . c .- a o 9 ll 5 D1 O c o o n . I‘ o u r. u _ w n . t n o o ;~ ~ . o 1 n .J . 2 2 B l a n K o :- o 5 u o o v o o c. ~: 0 w o 0 e , ccccccc .1 The answers to this quest;cn indicate astuteness on the part of the owner/managers. Fortymfive of the sixtym eight motels were audited by Certified Public Accountants. It is standard practice for motel franchise concerns, co—owners, and many affiliated chain groups to require that at least one annual audit be performed by a C.P.A. Thirteen out of fourteen affiliated cro¢ps (excluding AAA) were audited by C.P.A.s. Thirtymtwo out of fortyWSix 10* dependents were audited by C.P.A.s, Question 70. Mailed responses, (68) If you are an owner, do you pay yourself a salary before computing the motells profit. No .................... ... ........ 39 yes 0 O O 0 O O O O 0 O 0 O O OOOOOOOOOO O O x‘ O O 25 Blank. O 0 O 0 O 0 0 t; O 0 c G O O 0 C O 0 O f.‘ OOOOO u H H Many of those who replied no wrote on their questionnaire: ...) p (I) "I am a preprietor and therefore am not allowed to pay myself a salary." Two individuals indicated that they withdrew $100 a week from the motel for living expenses. Depreciation Question 51. Mailed responses. {68} Which method of depreciation is used on the building. Strauight 1:}..ne‘ O 0 O O U 0 O J o '.J J L) I D i, C- J 25 Declining balance..............15 '~ 1‘ Blanxj o b O 0 o O O O o 0 O 0 O O o a o F O o o 0 0 a 3 l4 N‘Ot sure a 5‘ a o f.‘ o 0 O O o '0 O . Stjm Of years J digit 0 o a ..v x.‘ o o o u o a e 6 Question 55. Interview res onses. :30) What method of depreciation is used on the building. Not sure.......................1 Straight line.................. Declining balance....... ...... Sum of years? digit. . Blank.......................... C 0 O o b c o o o O 00“} mm Fifteen of those interviewed did not know which method of depreciation their motel was using. Approximately half of these fifteen were managers who were not informed on financial matters. The remai.irg were owners who left this decision up to their accountants. Several larger lie terviewed establishments which employed accountants us d (I) the straight line method. One manager stated: "We have our depreciation set up on a straight line basis for twenty years. I donit need fast deprem ciation with my occupancy. (72%.) I want to operate for a longer time. I was using double declining balance and then switched to straight line." Another operator commented: 119 "Origirally I charge five per cent of my total inn vestment to depreci:t ion; The Internal Revenue Service objected and said I should use thirtymthree years for tailding, ten years for furniture ten years for appliances, five years for lamp shades and that linens should be charged off as an expens After going through all this work, it comes out about the sameo" The motel owner s were about evenly divided in wheth r they were depreciating their motels in twenty or (I) twentymfive ye arse One owner was depreciating his in ten years 9 "5 ' p a A r‘I 7 A Question Ago Mailed responseso ass; . ,_ . , ., i ‘9 What :3 the rate of deprec-at1cn {or the buildingo LPer cent per jearo‘ 000000900JOCU'IQ’;UUQCQQCv‘OOO 2.35% IIO'JCOOCQQOKJUQOCCQQOJO‘Vfi‘Jv‘00316.O% '1-avrjb00000008000000000000030 500% These replies indicate a fertymyear maximum deprem ciaticn life and a minimum d-;reciaticn life of slightly over six yearsc Nineteen of those replying to question fortynnlre mailed used a twertv ear life, and a twentymfive year life? Twenty eight did not replyo It - r can be assimed (sine interview hired managers were often not iniozmed about financial matters} that m ny of those who did not re; did not know the answer to this questioni Q estion 48. Mailed responseso :68) What is rate of depreciation fc r faaa rniture and fixturesa (Per cent per yearn) LOWOOOOOOOOOOOOOOOOGOOD0003000 4" A Hi n . < 4.. .u o o o o o c o u o o o o o o o o .- o o o o o o o a 3 .a r; i '1‘ u. MGJ- an o o u o o o o o o o o o o c o o o o e o o o o o J- 120 Twentymeight motels replied that they used a ten per cent rateo‘ Twelve motels used rates ranging from seven to thirtywthree per cento Twentyweight did not Question 56 Interview resporses( (30) What method of depre31atioc is used on fa rriture and flxa tureso Not sure DOOOCOOG.OUCO oooqoo.clu Straight line. ..LUJOQUOICOCO;011112 Declir ng be, lanceonovunoooooocg 4 Sum of years digit gov 31°¢1.9 O Ques ‘n 52 Mailed respznses, {68) Is the depreciation metn:d used for furniture and fix“ tures the same as the depreciation meghod used for dew preciaticn cf the building s 00 OUUOCODLCOU it t tt ..30 ’o.onooocoouv0Q0901oogcoo.0131.l7 111a.nKz0,)ooo.coo3 0 0 O 0 0 O O 0 B l “ I ]k 8 d. - D 0 0 0 O 0 0 O O U 0 0 0 O O O O 0 O O 0 O 0 O O O 26%”50%000000000003OOGOuo-uooo3 Corporation: r k 10 Blan O O 0 O 0 O 0 0 O 0 O O O 0 0 0 O O O O O O 0 O 0 O O - 2 u 9 O 0 O O 0 0 O O O O O 0 0 O 0 0 0 0 U 0 0 0 100%0 0 O 0 O 0 0 O O O 0 0 0 t' O O 0 0 0 0 0 O 0 O 0 O O 1 127 Question 40. Interview responses. (30) What per cent of the annual profit is reinvested in the motel. Low ...................... ..... 0 High .................... . ..... 100 Median ........ . ............... lO Proprietorship: Not sure ................ . ....... 4 Varies ............ . ............. l Partnership: Not sure ........................ 4 0% — 25% .................. . ..... 3 26% - 50% ...................... .2 Corporation: 0% - 25%..... ................... 7 Not sure ....... . ................ 6 100%.... ......................... 3 The above questions were tabulated in terms of prom prietuiship, partnership and corporation. The per cent of profit being reinvested is affected by the way in which the business is organized. In a corporation, the owners may draw salaries as executives of the corporation. In a proprietorship, all income is taxed as personal inm come. A partnership can elect to report for tax purposes as a corporation, or can pay tax on the amount due each individual partner. Motels replying "zero per cent" were usually new esm tablishments where no reinvestment in the operation had as yet been required. Those who stated "one hundred per cent" were motels which used all profits to upgrade their 128 motels. In some cases a proprietor had outside income and was able to reinvest all profit from the motel back into the business. The attitude expressed in the following is typical of many replies on the subject. "I reinvest whatever is needed to increase the value. I'm in the process of remodeling my motel. This year I plan to put $18,000 into the units " Einancial_Management Question 1. Mailed responses. (68) How 0-65 the way in which your motel was financed affect the way in which your motel is managed. Blank. ............ ... .......... 24 No eerct ....................... l2 Replied with no relation~ ship to the question ...... ... 5 0f the remainder, varied and overlapping replies were received in answer to this question: Because of a large equity base, financing is less of a burden................. ............... 8 ind icated problems with financing, lack of working capital and problems of cash flow ...... 8 Sonnd financing permits upgrading the establishment...................... .................. 7 Payments are too large ................................ 7 Financing does not permit upgrading the establishment .................................... 6 Financing forces to be extra careful in the handling of expenses.. ..................... ....5 Poor financing holds down sales promotion ............ 4 Regardless of how financed, the motel should be well managed ........................... 2 Keeping a cash reserve for working capital0 .......... .1 Some indicated a longer time needed for paying of mortu gage. A few indicated they had other income when they started the motel. 129 One major factor to emerge from an analysis of the . above is that less than sound financing, with the resultingly great demand for funds to meet mortgage and interest payments, can draw the motel into financial difficulty during remodeling or replacement of furniture and fixtures. This may not be a problem in the management of the motel, but it is assuredly a problem of the management of the motel. Ownership and management want to maintain the motels in good condition to assure occupancy and to survive competition. Lack of sound financing can reduce their avail~ able upgrading capital funds to a point where it is not fie nancially possible to improve the motel. Typical replies by owners to question one mailed are as follows: JThis motel was financed with low down payment and the balance on a land contract held by the seller. The motel would warrant an expansion of about ten units. Until the contract can be refinanced -~ and a building program established -- our manage- ment policy will, as always, be to promote con» tinued good service and friendly customer relations.” "Our particular mortgage allows us considerable flexibility. The financing should not actually have a tremendous effect on management, because the proper personnel, training, procedures, goals, etc., should be employed by the operations under any circumstances. The object is to give the best service possible, and make the best return on in— vestment possible, at the highest occupancy rate that will allow you to do this. Your mortgage or finance program will influence executive salary, reinvestment, additional building, depreciation 130 methods, capital drain, and certain expenses. IT gfiOULD NOT AFFECT THE ACTUAL OPERATION TO A GREAT EXTENT." (The underlinings and capitalizations were the respondentis in his written comments.) The above comments vary, but they are typical and indicative of the replies received. Lack of thoughtful financing can pose problems in motel management. Motels must meet competition, remodel or replace furniture and fixtures, pay their bills, and pay satisfactory salaries to keep good personnel. If their funds are drained by mortg gs and interest requirements, they lack the funds to maintain their motels in a competitive condition- CHAPTER VII MARKETING Advertising Question 61. Interview responses. (30) Do you advertise by: Road signs.....................25 othercooooooooooooooaoooooooooo23 Internal advertising...........20 Direct mail... ........... . ....... 13 Newspaper...................... 9 Radio.......................... 5 Television.. .................. 1 (internal advertising: guest room menus, signs, etc. Other: personal calls, yellow pages of telephone book, largemscale franchise marketing, chain referral, national advertising.) Most of the operations which used direct mail did so on a very limited basis and usually only to local com panies in their immediate area. A few used spot adverw tisements on radio and television. Where newspaper ad« vertisements were employed, they were generally placed in local, weekly newspapers, or in the newspaper of a uni~ versity if there were one relatively near the motel. Road signs used varied in number from one to ten :signs for a motel. Many of these signs, noted during ins 13erviews at the motels, were expensive and pretentious. 131 132 Some signs, it was learned, cost more than $125 per month rental on a contract basis. Internal advertising generally consisted of book matches, post cards bearing pictures of the motel, and occasionally motel brochures. Four owner/managers inter- viewed mentioned that they employed the marketing device of selling by direct, personal visits with firms where they felt a potential occupancy market might be tapped or encouraged. "Sales programs are not costly...far from it. Mostly all that is required is the time needed to make personal sales calls. It is not neces- sary to resort to 'buying' favors with costly gifts or giving away your food or accommodations. Sincerity in your sales appeal is far more ef_ fective and it costs nothing."1 According to the above quotation, personal visits are an important form of attracting guests, yet only four interviewed motels utilized this method. As part of their routine marketing program, however, Holiday Inns requires that the managers of their motels make five personal selling calls per week. Question 26. Mailed responses. (68) Who decides how much should be spent for advertising. 0wner............ ........ . ..... 59 Manager...................... . Both owner/manager...... ....... 3 1Ralph Dellevie, "Modern Motelkeeping: Part 3; IEstablishing a Clientele," Tourist Court Journal, (March, 1964), p. 26. 133 Here again, as confirmed in Chapter VI of this study, the owner makes the major decisions where expendim ture of money is involved. Question 64. Interview responses. (30) Do you budget a specific amount of money for advertiS1ng purposes. NO. 0 O 0 O O O 0 0 O 0 O 0 C O 9 0 0 0 0 O 0 0 I! 0 O O O .24 Yesu u 6 O 0 0 u 0 0 O O O O O D C O O 0 0 O O O 5 O O O 0 6 0f the six who responded "yes,' two stated they {3 C5?" 1 C‘ 51' -. -et amount per month to a franchise organization n ( fer eluertlsing purposes. One said he allocated $l,000 per month for advertising costs, and another stated. "We never go above a certain amount." Question 65. Interview responses. (30) Do you budget a percentage of sales for advertising ..‘ ‘Y‘ r— ;"‘¢ A —\ E"/’ r P". k ‘(. L.‘ .- NO.5000...,00000000006000000060019 Yesu-OOCOOOOOOGOOOOOiOOOOOOOOOGOll Percentage Budgeted Low d ‘--'oa:uoo<.oouooot\0uoo:ndonut-.0009.»[U k} 1 gr) I O G 0 O O O O O 0 u C d O k- 0 (I 0 U S I? O O O 0 C O O 896 Media'n L“ O O O O D 0 O I) O O 0 a C O F 0 U I 0 6 f 000000 [431,5 0f eleven who do use the sales percentage method for allocating money for advertising purposes, the reply of one was typical: "We use a per cent of last monthis income times the per cent we want to use for advertising pure poses. However, there are certain obligations that must be met regardless of the per cent.” 134 Question 66. Interview responses. (30) How is the amount to be spent for advertising decided upon. ' The vast majority specified they advertise as needed. Many do not advertise extensiVely simply because they could not take care of more guests. Some typical comments on this question were: "It varies with the cost of signs. I put up signs where needed. As for other advertising, I guess it's as needed." "I don't advertise. I don't know where we'd put more guests if we did. I had one streak where we ran forty-seven consecutive full houses. I just finished another streak of twenty-one con- secutive full houses. Our best advertising is good service." "I consider what needs to be done. I use common sense in dealing with the public. I try to cover the major highways into the area. I feel one large sign is better than several small ones. It's also important to know where to put signs. For example, we get more travel here from south to north than from other directions.” In addition to the above comments, several of the motels which belonged to chain and franchise groups were required to pay a specified amount to their national firm for national advertising. This payment consisted either of a specific charge or was part of the franchise fee. One manager had a rather unique approach to adver~ tising. This manager said: "I spend the advertising dollar on sales promotion. I give a swimming pool party for salesmen. Each salesman tells the other. For example, last Christmas I looked at typical giveaway items -- key 135 cases, fountain pens, etc., for Christmas gifts. I was dissatisfied with everything I saw for the money. I set up a big bottle of whiskey and several bottles of mix in the lobby one week before Christmas and kept it there until after New Year s. Anyone checking in was told to help himself. I felt that most salesmen appreciated it. A few were rather slow in getting to their rooms from the lobby.. I estimate the cost at $200. I figure it would have cost approximately the same to have pure chased gifts. I felt that the whiskey gave me a good return for my money, as I have a lot of repeat business. I have strictly a commercial clientele. Rather than advertising very much -- I couldn‘t take care of them if they came _- I'd rather use the money for sales promotion, and once or twice during the summer throw a swimming party at the expense of the motel." Question 62. Interview responses. (30) Which method of advertising do you feel is most effective. Word of mouth .................. 13 Road signs ..................... 10 Good service ................... 5 Belonging to Holiday Inns ...... A Personal calls ................. 3 Good location .................. 2 Newspapers ..................... 2 AAA ............................ l The above tabulation groups most of the widely varied comments received. Many of the owners and managers were outspoken in their remarks. "AAA is the best of the paid advertising. Our local association also refers to each other." "Satisfied guests are our best advertising -— one salesman tells another." "Christmas cards. Many appreciated receiving them. I sent the cards to those I felt safe to send them to." "Our best advertising is our association with Holiday Inns." 136 "I have had good results from a personalized lugm gage tag. I have had very little success with telephone yellow pages and direct mail. I did a key to the ads, so I was able to test the rem sults. The value of post cards and brochures in the rooms is very intangible. One of our best methods is the selling we do over the counter. It's hard to tell what is the paysoff of this type of advertising, but the comments received are gratifying. Probably the most successful is high» way signs. Without highway signs I would not get the business. My big sign out front advertising cabanas has been very successful." Most operators felt that their highway signs were their best form of paid advertising. Most also felt, however, that word of mouth (one guest telling another) was the best advertising they could get. One manager solemnly noted, "My best advertising is mouth to mouth." Several operators expressed real dissatisfaction with telephone book yellow page advertising ~~ none had anything good to say about yellow pages. Several con- tinued to pay the fee for maintaining an American Autcm mobile Association sign although they felt it was of questionable value. From the preceding it can be concluded that guest relations are an extremely important form of advertising. An extensive system of quality road signs will probably give the best return for the advertising dollar spent. Guests Question 10. Mailed responses. (68) What is the predominant classification of guests. 137 Traveling commercial men.......56 Tourists.......................35 Other..........................l2 Not sure....................... 0 (Traveling commercial men: also includes traVeling salesman.) (Other: university guests, conference guests, skiers, house hunters.) Question 67. Interview responses. (30) Who are your guests. Traveling commercial men.......29 TouriStSOOOOOOOOOUOO0’)3030O000021 otheroi.oo.uouooooooc‘1uJOloanxsouao6 (Traveling commercial men: also includes traveling . salesmen.) (Other: university guests, conference guests, skiers) The term used in both questionnaires was "salesw men" but the respondents to both mailed and interview questions were quick to point out that in checking this category they meant primarily commercial men. By this, the owner/managers stated, they meant men who trave;ed whose work took them away from home ~~ but wno were not necessarily selling. These commercial men to wnom the owner/managers referred might be, for example, accouniim* who came into the motel‘s area to perform audits, or technically trained individuals (such as spec1alized mechanics and repair men) or truck drivers with national firms, or business managers and executives in the area for consultation or supervision. The motels in the study were to a great extent dependent upon these commercial 138 travelers for their livelihood. The motels made every effort to cater to this group. One owner stated: "I would like to have (a clientele of) eighty per cent commercial men the year around. TouriSts are most destructive. Commercial men are most generous. They donit write on the walls, nor do they bother us with unruly kids. They are the best guests. I would rather have them. The tourists expect everything to function perfectly for them. They do not like noise like a blower or a refrigerator starting mu normal noises they have at home. Some of my tourist guests have unplugged the ice machines in their rooms because the ncise bothered them. The ice melts, gets water on the carpet, which tends to ruin the carpet, and the next day the tourist is unhappy because he doesnit have any ice!" One manager expressed dissatisfaction With 1ndiv1~ duals coming in for a bowling tournament. He found them to be unruly guests. When this was mentioned to another manager during another interview, he aid: U) "I found bowlers no worse than any other grOup. :1 he thinks bowlers are bad, he should have a group of hot rodders stay at his motel. I had a group stay here. They came in with their hot rods all revving up and then they had to take them apart, carburetors all over the floor, and grease on everything. It was a real mess." The majority of motel owners and managers expressed their dependence upon the commercial traveler during the week and during the offmseason from Labor Day to Memorial Day. During the offwseason, many motels usually had full occupancy on Monday, Tuesday, Wednesday, and Thursday. 0c; cupancy was generally low on Friday, and higher again on 139 Saturday. Sunday was normally the slowest day of the week for the motels. Although the tourist was, in the summer, very im« portant to motel occupancy, virtually all of the motels constantly catered especially to the commercial traveler to attract him as a steady client wherever possible. The motels are very pleased with the commercial men as guests. These commercial men are necessary for the survival of the buSiness. Only the selected motels in the extreme northern part of Michigan (and all motels in the Upper Peninsula) specified that tourists were the major guests. Question 63. Interview responses, (30) Do you have personal contact with your guests. ‘Very much....... .... . .......... .20 Some.. ........... ............ 9 Seldom..o.....,........i ..... ...q l Never..............,.........o. O n 7! Respondents who replied that they only had some personal contact with guests were in many cases the hired managers of large operations and were not requirei to work at the front desk where they would be most iikelv to have contact with guests. Those who checked "seldom" were usually owners who had a hired manager. One owner said, "I have some contact with the guests, but the manager knows them all," A man“ ager said, "I like to get to know them. If I get one indie vidual from a company, I will soon get five or six more." 140 The person on the premises in charge of the daily supervising of the motel operation -~ whether he was the owner who also managed, or the hired professional manager 1w did usually have contact with the guests. His own personal ability to serve as the motelis gracious host, while he simultaneously saw to the routine of daily motel manage: ment, was an instrument in the motel 8 general ability to generate the desired impression of its friendly hose pitality, attractiveness, and efficiency to the guests. Question ll. Mailed responses. (68) What do you estimate is repeat business. Low 3 3 D o O 0 O O O 0 O 0 D C G D 5 I Q «1 a C 000000 1 0% Hi gh O 0 O O O O 0 6 O O O 0 D O 0 O O O a (J C I: O i O O 0 90% ME d i an 0 0 0 O O D O C 0 O 0 O 9 O O 0 O C O L' G O C 0 O 50% Question 73. Interview responses. (30) What do you estimate is repeat business. L0 V] O L‘ L) Q L' C) 0 o 0 D C v‘ Q t A L' , J 'J U U V) '.' C (i C - 20% H l gh O 6 0 O C; 0 C O ...... s )))))) _. '3) . L) "‘ .‘. I _ a 8 0% Me dian o c o o o oooooo n o o u a o e ooooo u o . 60;; Most of the figures given by the owner/managers :n reply to the above question were estimates, Very few kept actual records of the true percentage of repeat business It can, however, be stated that the Michigan motel owners and operators of the selected motels do have loyal guests ‘who provide repeat business if they receive good service and good facilities for their money. Part of the difficulty experienced by some owner/ Tnanagers in answering this question was that they were puzzled by precisely what the question meant by the term "repeat guest." They stated that although one particular customer might not reappear in person at the motel, that customerls company would perhaps register their other rep- resentatives at that motel or recormend the motel to then. H The owner/managers classified trzs as repeat busines ff.) \J C"? o 3 Q 1 3 by a company even if not by an irdividual from th: The owner/manarers noted What the ‘onmercia. Iran :rr usual : whose a wrtel for its standards, its facilities. F‘ 'w “ r» -K v A ' 1 I“ if‘ ‘2‘ -r R . n. -‘ .r ‘ C. l i t, J \ K.) . \. 1'..— . x. ‘ ’ uk,’ l L C '. ’7» '- ~./ L - C ;. x. L; ‘ L ‘5 rd n7 mlprCe T 1’ FL 3 0" UL) l'l@\ ‘prOVldimg ’1') that the motel s prices seemed reasonable to him). The J) \ enable {1) ( commercial men like to use a good motel With re rates located as close to their place of buSine U) W) (I) h s a po Sible. And they hope to find a motel in a location which permits them to avoid crosstown traffic ‘AA- , A -.—. ‘ fifl~ / -' \ ~ _\,: ‘ iv a f Alina/“y; the owner/nereua;rs did 0-, -HW.,~ ...t., that convenieréo was all~1mpfrtant to fhoir ccnmercial EUF“T5, TVPV 01d ir113ate rrat a- ..L “I in: WV?!“ men who rereatedly lodged at their motels did n.«v re \ ([1 y. (‘1‘ T L) .1! .3 a D C) Li) T L7 4 j i J’J curring busines appointment: T motel. This fact is an echo of the conclusions maie r4 a restaurant study performed by Standard Brands. That study concluded that a major influencing factor in the selection of a restaurant by a customer is the convenierae 142 of the restaurant‘s location to the customeris consistent 1 activities. gommercial Rates Question 68. Interview responses. (30) Do you have a commercial rate (a discount from the standard room price given to commercial travelers). J N O 2 cl 0 a a ,. c a < o u L ~ 3 o c 4 ~ c r o - t w -. .. \l o 0 Y e w _. g o «3 -J o u I) o v o a a o J .3 (n o u n o o v _ o t- 9 , 6 Question 69. Interview responses. (30) Why do you have or not have a commercial rate- The vast majority did not have a commercial rate. This ilnding might, Without further examination, be viewed as unexpected in light of the importance wnich the owner/managers have already indicated they place on attracting the commercial man as steady clientele. The following explfnations give some insight into the owr'.e r/ mana.ers5 replies on the matter Some gave the following reasons way L'ov did "I don t think its net searv l don t get a special rate when I buy needed items A starlarj rate is needed for comparison. We trv t g;v value for the money and not Cit corners. "Commercial rates are damaging to the industry. They tend to discriminate against the public. have many who stay here regularly but are not Com mercial travelers. Itis best to have a set rate and stick with it. I try to give service for the dollar spent." ) ’—4 "I donlt have a commercial rate. However, anyone traveling alone is entitled to a minimum rate." t ~- -A-MLA-o n.- A—s‘tgju“-— th—u—I A A-CI ——4-u_a‘l....uo ~L ..nz-u- AA —. A. - L..>a — n . I--—4 A. u . a. .... 1...- A..-‘ I a l .M a y . - «_ , i , Ctnsumsr Farsi Pep: rt on in‘ng ;.t r nits a'i _ .9 : x—“—ca.s_Au-- A -‘>“_A. ”A: ... . ‘ * ~ — ‘ : fi’l'- -.n-A4 ...- .;A 3,... ;; . - ~I- -Ap- --.. s. ..- Att.tudes txew iota: tardarl Er—L 2, '-.. i9 5;. p ” Some Who did use a commercial rate had the fol~ lowing comments to make: "We give a $IVOO discount to a commercial mane If a man starts to fill in the registration card and asks what this is all about, where we ask him to fill in the name of his business firm, we know hecs not a commercial man and not entitled tc the rate. Besides, when they walk in you can tell,” "We have what we call our ?big ten club.3 If a guest stays here nine times, the tenth visit is on the house, The salesman keeps a card and each tim he stays here we initial it, On the tenth time, w put through a credit on his bill, but the rate re- mains constant." "7 u < (D a commercial rate because we feel the ccw- es limit the amount their representatives can d, We also have it because all motels have l , ("f (U , :77} >11 'J (T) "W m 3 '73 ‘r" 4:3 it is interesting to note that this last cpsratcr felt that all motels had commercial ratest Only six of the thirty motels interviewed in this study actually used a commercial ratec The vast majority of the motels interviewed WhLCh did Flf't have (TilrfimFT'Clriii’ rates 01‘]. hC‘e‘iC-‘V‘EI‘, have a mini mum rate; They noted that if a guest inquired whether they had a commercial rate they would reply, "No, b;t c r aliases rate iS~»o" A commercial guest was usually given the minimum rate regardless of the type of room ~w singlet double, cr twin mm which he occupied“ If he were to stay at the motel for several days, he might, for example, be plaC‘ I [\ gl- 1M4 in a twin room and later moved to a single room; but the rate for him would be a constant single room rate. $923993 of New gusiness Question 70. Interview reSponses, (30) What do you feel is your best potential source of new business. Businesses in the area.c..;.tc More commercial ment 09.. . ,. Satisfied guests,,,t..tcc.ic .. Secretaries who make arrangementsccc°,.,i.v...... University...iooaio.(0......o.c Referral.,-,,oiooi,oLCJL..U:..J Personal calls v0.. vaooo,t.o. Weekend packageotc,.cti,,t9vo.v Convention bureau., .. o, a.”.“ O O O F‘F—‘i—WUYUUO UIO\\O (0 tion wa U) A typical reply to this que : "I3m not sure, I guess more of the same?" Nearby businesses were felt to be an important sources Commercial men came into the motelcs area to call at these local firms. The commercial men who reg)» larly visited these firms were sought as repeat clientele And the owner/managers used direct mail cr personal "; to encourage local firms to refer their commercial J) vi.itorc to them. ( Many owner/managers said they Wished thev could fix something to increase their weekend business in particular Many of the motels usually had full occupancy on weekdays. Competition Question 71. Interview responses, (30) Whom do you feel is your competition“ 145 Motels in the area,t.lou...loo,l Everyone selling rooms,o.u.uouo No com petition eatlot_ouao.00.. DOV JwtOW'J motels g.tu al.0000U.u LeFJMKDKJt' Hotels and motels,:(0 “Qt,;. c, H0 l i d- a y I n [I S ,, 0 t (I J .' .‘ L‘ b 0 .‘ .' d O u 0 r ) 0 "Holiday Inns" 5 (T) m ”U m m H ""5 H m 0.. The individual who lected that motel out of several motels near his loca~ tion Most of the motels were not very worried about ‘rnir competitiona Two managers commented as follows: '1 , _ 4 ~ ~, e only 00mp:ClClOfl one has is oneself‘ Anvvn .~* *hinws he steals frrm others is in left f‘e . . 1 1 ,r or inadrdua l are ‘our only problem.‘ ”We don t have any real competitiono in our loc ’ s ciation we lcox out for each other an re motel a s: for the guest” 1 don‘t feel that we really a competingt" ... Most of the motel owners and managers responding to this question stated that r-earby motels were their competition, Many also mentioned tha it we: fz;eri-t Special mention should be Wfiufl uzf+ of ;T& atti- tude of all the owners and wanagers interviewed 1n :n area of Grand Rapids, Micnigan, Each manager or owrar (all interViewed sepa.rately) spoke entrusia:tl ally of their fine motel association and of how all the motels Grand Rapids worked together. In other areas of Mich: -—‘ Cf P k “'3 D. (D Q) “<1 3 {D H u :5 r) :3 *1 U'? ~o :3 DJ a: d ’) ‘4 2‘ O .17 3 ’1 h’ p- a, H, 3 w :5 Li‘ ”3 1 I) t 3 r) “'3 J F , < ’0 T) O . ’) l—J U1? 5 ~ (1) (“Y ,‘I ‘<‘ .— N O o O C s c O 3 (IQ "5 (D (I) f I) 3 O (T O w @ O ('T (T‘ }__1 U) fi) X {L '31 Q) 4 Li) $1.. L1) } ”3 .5 {/1 F-3 T (T) 3 311 ( .1. (I )1 ilionnaire were chain cr (1 (ll chains are: Holiday Inns; motel Chains initiated and owned by older leading hotel chains, such as Hilton Hotels8 Hilton Inns, the Sheraton Hotels‘3 Sheraton Inns, and the Alber Pick Motels; and the Charter House Motels owned by th Hotel Corporation C) H :3 "U (D "75 FA. 03 P .L‘: O O 3 0 (‘1' ‘1) F—J F!) U) f—k ".5 O (D F4 \D ~J\ L— Y '3‘ I} 5 l 1 3 J T H) "D In F‘ n R Brne of its adVantages std disadvantages accruing to the motels which are fran:a;se were discussed in Chapter IV of this study, Howard Johnson and "olidaV Inns are probably the best known and the more typical of the gfcgps crfering franchises: Hol day Inns was started by Mr, Kemmons Wilson, a building contractor from Mempnis, Tennessee. "in 195A, Kemmons brought s:xtwaovr big btildezs t- .ewpil? to fire them Nit" shit/slasm for maxing Holiday Inns a natiinal chain, Fewer than ten caaght fire, Even those did little to fa* the flame...ln l957, with forty seven inns in operation, seven of them company owned, the s,. came up for Holiday Inns. That was the year of the first stock issue one hundred and twenty thousand shares at $9.75 per.. Fortane was to ! beam on people who bought. 1"Third Annual Study of the Holiday Inns, The Journal of American Innkeeping, QSept., 1963), p. C . ”5;. ,w \. kl. v v mJ ,. m. . «J 4., VJ .r. a a .1 ... .5 .. .... W 8. l ...: n... f . 8 .r r. F. C a .7 c. a... e o... rt nyl , x, ,-e at. , ._ no nu .ma .. w. r. o rt. r, f AT. .L 2.. C r. a f C V .o C P. c Eff G ..v r . l; e A, _ w. v: Q; E C .f.. .0 Wm. Y. d . . . V...AJ.. d .0 r; . j a a. O .3 n1 ...}. ..t S a w. t .f. t C N. n. C a. .-l 1n. r m. I .C 2. L S w a C . a. a rd Ca. V. w... n ..e o a .j n . a. t. at _. .V ..d. T. . y... l .2 n... O... 3 . fl Q“ s n... W C P. ..\.. C. C ”H. a. w. _y -.. r d A... z. 3.. ..H w z... k ..w C C T I C C 2;. l ._ m. j P. «t ed p: n pw .1 to as to no U“ ”A... p. _u r. no «t .K . n. T._ ..., C .k. m f ... w... r. S 9S C C a .- n . n. A... w .o _n. e. n ..I w K a f C e . _l . a n C C e . a: a , f n. C r f 1_ . e V. . h a. a .. a .C a. v a. r. U S a C b . C P .l t r... Vu V... b .1. 4.. C a ..-i . . n Y. At» ,3 AD n «(e .ru. 2 L VA n- t r. Y L S a V. a: e. l e. 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'15:,“ V“ , .1valy 1- -.K. , ~ Bot "Franchie 193098 se 1P sell ~uC an ing has “i *mpf‘) Ivat re nt pidly evolved and dynamic American merc handis The appeal t takeoc+mlw steu5r>o (D O m 3 d U w my; ing e ranw chisee is the opportonity to b ild a pr itable enterprise for himself and h:.s family w h the ame, boy ying power_, and professional be top of a a H national organization. * One man“s consideration» as to whetne' it is bette to be an inde endent motel nwrer or to ope. ate a frar ohise motel are stmed up by Mr MarK F1 riedman, who op~ erat~s both a frarchise motel and a” indenenden: Hotel n w t A l , .7 , .. _h v . ,1‘ --,A a ‘ f l W97: startlhg today, i WOuid hid: tL DE “ranchise.3 Eat if the franchise agreement lim- a man s indegenden e lo are way mainly in rer q.iring standards W“ in ;sn t such a bad thing — it frees him in anogve? t giv s him.a figntihg Chance to soooeed.”L lo addit1on to the fray hise ard chains, I'aveLiig has developed motels across the U ited States by the cowowner method. TraveLod e f rd~ a local investor {wri may mean one ihve stor or a g c of nve tors) Willis: t‘ pvt b\ fifty per cen of the money. TraveLodge puts a, the remaining fifty per cent a’d after: 11to a co owrer arrangement- imperi:l hOfl ICllCMS v.2h the sawe orioedire ,i require oriv twenty five per cent from the ow~or a d e ‘1 ° " ‘ n " ' r- - . " ~ fi' '~ Y‘ ’8. v, " *Wllllam P. Hall, 'Franohising us New Srr,e fa a Old Technique," Harvard Business Review, sJan. w Feb., 1 2 n .I 4 r‘ " n 1 p .- X ~ - . A ..., Mark Frledman, independent vs .rarcnise onweet :I , f ‘ . Innkeepiog LApril, lgou) p. 2 . a...“ .4 ...-~— ...- § : L l \ .‘ '1 $’ '- C.‘ ' ,. - ' L'— J- . r”: or; ‘ A r. he: V? F. agemen c? ‘T ‘ 1' - C' Y‘.I - L ‘ rd I 7‘ ‘ ‘ A .1. A. v 7“ _.‘ ‘ - A t4 \_, h - . J »: \ -h w T5 0 [Ike 1) 4 r41 ‘ L. we; e~~rv t‘fiheh y are Q X. "a C"? (a m '1 a willing V9 (.1. LL Fm p r \ c he b'V 4 'I - l. W. '1: F.) (D ID m 'I) {f} A L. 1 _ T‘s roww :vr 7‘. I”: ”Best A H (3 (l) d (D perial AGO Will also ge and Imperial #00 '3 to carry s l [,4 SE t? 813% nggpi In: gzavt In Best Wester< cn must be made here eluding a spe a motel can adve *1 _ ...3‘ K - ., '- dal J : Way , I __637’7V1t1r'?‘ P . ’ IQ ' y - J. l Wr - L, u) v‘ ‘\ ).A.J not precl of U tanoarje cowownersh: <‘T D " (U *- V. H- I) m }_L If) H 1 re that on see and be s. frahcrw t aff1112t 19 flélfi W lv firm a e n;t:tand .1. ”3 Q 1: awount C cne of t :hg pgrpc« standards exawgle, l T“ l"‘~’ .A r $0 of L? r Hosts" Averican A abllsnes a p '3 9T) ”1 .k9 It). I'll (D If) ( 3 f l .—‘. C‘f‘ if) m (‘A‘J -.—' ‘.-.l-7tl g aIleiat: n r—fi {L oney per .— $‘ ('1 1| 4 .. :13 4. 4.4.1L 4 .. , f _t Cd» '* yuan/i 1.. .. «'0 s. .»u_ ‘ r f- ~v—~V‘ -1 e:*-*.'L' ‘ (“v * : r ‘ ' -- M; C. - q. l-.. C" ;;.I-'.-‘.C ”b1 e istrfbute? otels w51\n r‘ , . . .- xx: ',1 Em (I) :3" C A. V HQ w ;__1 D1) k A) L?" (—T Fm f‘) K '3 p—j .01 [’11 *1 U“ 1'.) 71> 9’ 'U 1: UHF? tlon 9 Your motel \ ‘3 "9 ,C. r .. r. :3 ,. .. l—d “ \. ~ ‘ b- k; .. >1 6+ [N m (I) <1 D (7‘? ‘L. .l- r“ k“ J} ;u t) E Q} i (T) }_J LJI. (I) (.7 (I) (2.. U) i f) r— J 0 a U < C‘? T m j) 7:: 5.: In :3 ‘3 H :4 cf (T) U) ,3 cf 0) (n W (D 81 it in tre motel ... F. OD r 1 r3 ]\ b—J r + :3. C m (‘T ”3‘ g) D 'Q C) (L <1 - - s , - T? ,_ a L r T. .L L 1" I .- \ x *~ ~ v: ~ T r‘ ‘ 0 .. ~ . J - A lat A H 1 L Q) 7. 7.1 ID _Ll‘) ’1 '1 (1) U C"? C C) () U U‘ ’D ‘ (I) :3 a» ‘ % OF) (I) DJ CT % II) ’1) :4 (I) \ (i ’3 IT) P. L ' ‘C a (W W (70 FA ". VJ?" ‘ o *1 C"? ,3" IT) m b, A 0% 1 (I )r fl: Hw r-n .J/ *— FL w ('1 f | :5 l \ 9" D.C. Washington, «IF‘. 'lc-nnun—ags‘— ~ .~ Y." F41 6D TTu; I 1‘) 51 FA Yfiv1hg fewer tna inellglbl “ (W .1 ‘S ('1’ F1 (I) _Q‘ L- ”U km»- .1 51 :3” ’J (“l '1 “ad-~44. Amer: C- H) -L_ U) l A. J) (I) (‘1‘ u 17:”- - 6- i. ;. 4 x .L - privatx: S ‘4. A I _W J \ L O . v1 ‘ 2‘. :3": (D ‘1 (D .a-f .3 lI) nrte "\ ‘1 r d“ t" a: H D C? J H _+ (D }—.4 ‘ (I) L / t—f‘ (D (D p {I} \ 4 _. “4-4.— 1.4... ‘; ~“g,-Ta 4 ... Ila-‘4.“— z’k U t r? W‘ -' b 1 ' y w T h,_ w n \J - A TDFJZD HJ'TV'D Question 2. Your motel is: ‘- w (1 f c A. F‘f) ‘\ A k .2. (I) ("n . J (if: I) L‘.’ b“ ‘ - 1 V 'v - I-’ ~ . - + 7.. ; ( ' v—f.’ F'" r p (3 ) >—=~ r L C Y” ". w _LJ. V. i; }._.1 F" ‘ J. (1'7 I'}) r- F_| 1L1) Fift In Fr AA Ch 0 fl \/ ‘\ I Flir‘ I: I—"9 (‘1‘ i—J (D Fir. "r. .v ‘ ’W l I“. . . J .. (D P i D g ( k t. u ,. n L Hrlc L3 Pk. v' 0 3 l~ated..... Interview re U) dependent.-... anchise....... A.u. a .X J. . . owner... ’ *1 ri- tl‘ LL ("f LT (D )4 U) vT) #— < (0 .~. .. -V it {~\ ‘7 j)-1_l. ’;J.~ mmendaticn. or mention w 98 d art a 2’ *1.) H‘ 1 (T) .I ”*2 O A i-w LL .... O x '— t ~‘ .J-' I! 0 v t \ J t »—o~ 'J y— t (_T ' .‘n, , L (.1 ‘ d nterv1ew r you are af H p. \v f. i. Q. n‘“ ‘ . drsk..!".lg_‘ 11F}. .. t . ”C"vcinern u a c t- c r.- w ’lO I'N *-J- f) They dll F,’) L— . the thirty motel chain or franchise category. r? 173‘- (D _d.) (T L. L ‘r Ll e U.) (2 K. g YOU It can only be ps are proportion Q K. r4 C) k 3. s. ‘ oo -\ a ?":9: Q'- I y. L1) ’1') r J ) (1 II) p; 'j y. I») (O l W J {_‘T U} -‘.) (”D .1 (I; O L. I J 4 I l 0 U) Th }.J( 0 133.091 55)) J1 a connection (‘1‘ L O V ) (on \ ‘V 1‘ I .1 J a O k L a o .15 (I 9r! T “.- Q. (I) ‘ -._J ('1 /) LL) ([1 3 r‘ f; t .2. ii V) th C r .“ V: ' I O a re a.) . / ("Ty . C If; 3 L— l l on: . "i . .U A; O O A! Q .J. A?- hk.’ L. Q Y~ L: L LL»- Ki race a fur F1 U“ \Il ideal motel owners and my ino responded aft Ll) _\ D‘ m «D 1 (1' 5‘ firmatively to this study s realest for an interview from Q) .4} \ ') UQ C) m \ P (if ,3 ,) If) ( D E 3 (1) p ) 3 L. k ‘8 m I. I?! w <1 '— D .r“ 4. received le (‘4‘ of 1 [‘1 “1 If) “‘3 1 .LJ 1 [J zeting enty~five random motels rquested for lPLFTVZ-MS. {Ltteen wer2 aWSWQ trlrty w 1 1 ,1 o — H \_\ J -1 J P...‘ 1') D £1 1 J T" 1 Q) 3 § + D (u \ K (I \_ W L-.J *— ‘1 <3 r J :3 1' :5 I | H ' I h +) ’ '1’ ‘VQT‘ ”BTQVP‘T"}" 31". 75307?) 9‘12“}. 37‘1“) 5’76? CiC‘ CT'V‘IS‘Cit-bf? 3'" V ‘ ‘ ‘ . 4 , ,- Q ' . 'N .‘x ~ '- a- V ‘ ‘- I . ,v - - ~ ,' ‘ - . ’- '4‘ +-~ f‘ "‘ JFK 33/41," E :tr'VT’":’ " Cf writ: 'd ..F-‘rr‘. TV- -' 21'1" W; J: ' "D rs 5‘3 U) of D?) t) M H U‘ D I) I) +- h \1 KL) 3. *_-I ,— u' . _. ,- [_ ._ V "x F" <1 ('1 ’K .. ' O r . C ‘ 1‘ — - ‘ (‘i'f‘jf‘rl' . - . vr vawagrr .)'(.V(p*1f-7) t_’~_ y ' v f: ‘ 5'. r. L' I ... I. .J J .L .5 A ._v .- k. T o 1%.. —, .1 L. .-.-..._ - (Al the knowledge a 0 daily operating r? *- ‘ 3 _ \ ‘ L_'\J'J.t"‘»' {T'J .t) G‘L‘C'A. U h .. :2‘ d. i W :37 u ‘ 'I‘th‘"u’~— \ ‘ , frequently ......_,K_-..._‘..-. .._ I“ "\ if”: 2‘. { .‘. f‘f . JUL. CATT'E, C ...—......“ a“... ”1“,- (a ‘ fa ‘ 9 .J .A'w‘m. .... .... ...... u. .. .1 b7 ‘:‘ "1;: r‘ “.4- M W"“—'.) 7 .~‘ ... V p , A a >- 5« - -] AP‘ - 1 i (‘10.) L". Jr?! [.‘T‘ ’ J . ' I7 V - a. I} 'J‘. D“’\.‘LJ 114! “O i. - -... .a . I 73 r; ’5 r‘ r y‘ t '5‘ mp f 1' ‘N Y", yr (A y i (A 1, ’J- A ~ ‘ J J (J, - , \_ i_ ‘ ft . o. ‘3‘ ( hm « a re or.s. ‘1' l l I '-‘ .1 A“. ,1. T4 1 A t- ‘1‘. 1 - \j 0 Is yes no _u “wan—u..-- sag—... ‘5 “ -u’m your motel audited by Lt -ipr r o “1'. "f . T) “L t 65. 66. 67. 71. 72. ’U (___; 5. I Are the employees informed as to whether or not the operation is profitable: yes [’10 ...—u- Do you have: a fullntime accountant a partmtime accountant no accountant m-x- _—‘.—.-q_.- 7...: Is the motel earning an ade:.ate Yétjrfl on owner s investment: yes no not sire mm.”- ’ ——— _‘.1 ...-.2 FA: (f) 3) I) O) c). T U C. _m {—0 *D *1 D t ‘f L ‘5 "J ‘) 5 What do you really feel motel investment: cm 11 J/O . m- 10% 1 5% 20% ::-:: other % (specify) u——. .. -:r—..-l—,—-o ,.. 'I ~ '1.” .—. -,:—.gu-.-..,l_~._~. Which of the follow1ng do you really bei rv‘ should (r profit percentage of the sales dollar: 3% "“"”_ ‘l 7% ______ 10% _ other % (specify) 3 If you are an on or. d? V“. f‘T v" ".015 a salary before computing the mutegv: .: ‘.:; yes no na- ov -.—-nu~.-_:— .3:- v-uou’. Lg-lu-n.‘=‘ ..- What per cent of the annual prCth is re‘ry:3ta; the motel: % m-mfim L). If the housekeeping department needs anitrer wa1a who decides if she will be hi ed: owner manager ”I assistantamafiager executive housekeefiEFflgfl other (specify) _I;z__._.D_-.‘ :1 73. 74. 75. 76. 77. 79. 212 Approximately how much average time per day does the manager spend on daymtOnday operating problems: less than 1 hour 1 to 2 hours 2 to 3 hours more than 3 hEErsnfhow many hours) l _v-- _ Al‘l Approximately how much average time per day does manager spend in planning for future business and operational improvement less than 1 hour 1 to 2 hours __lel_ 2 to 3 hours . more than 3 hears”€hew many hours) I.“ ..--__— L-n-q H’. -~_-, . ___. Affiliation: none . . .. .. -, v . . 1“. .' “eve; really the. |-l'l-l. --n--‘ ! lt.’\v ,. ._ ,1 plan to affiliate Holiday Inns Howard Johnsofim-mu" Inn America Imperial 400’_‘ Quality COths—I “ other (specify)_::_ ...-2"- ...—cu:— m.— If affiliated, are you affiliated through: franchise chain If you are from this yes no no t_r n—n. ...u—(u a x-:-‘: mm‘—_.w Does the cost of affiliation gay for itsei yes no V . not'EEPEW «In-"J;- -w .4- L-Cmn-fl— Who decided whether the motel should or should hit be affiliated: owner manage?" other-(speglfy) 1..—m ?l3 80. The decision to affiliate or not to affiliate was based on: good reputation of organization to Join bad reputation of organization to JOin dollars and cents figure projection intuition and beliefs previous affiliation effigff5nce other (Specify) _Aw-rw ~— c— q'n‘. V-uc . ‘mm . -—:— a -..4-1-1 -:_.—‘ :1.“ —t.. . TH? personal IntQFVIQW PP020ddF€ ~~ Letter .mu —.-___-i._-.—A—._.- n4-‘.—1_-——A ...—g... -_ _-_-. _----—;-.- -... n -.. J-u. .._ - ;-—-A--..-.,—: El ——-—- - «...-— NICHIGAN STATE UNIVERSITY *u.‘ ---—~ “:4 1nd..— ...—p_—tm o “1” School of Hotel, Restaurant and Institutional Management £05 Eppley Center East Lansing, Michigan A“ 03). U51? oif. fit all motels in Michigan, your matel is one of twcnt ’ 1 A, . r: _ :A. -\ ,. 2-: .- ,. it . ’iesi“d :or a personal interview Iv canaribute al;_t. \ I We will greatly appreeiatw your cooperation and ya 1:? pation in this study. Please return the enclosed post card indie t1nn a CCSCT ye; will find it poss1ble t3 snare aprfrx1nz‘ an hour and a half of your ::Me for a personal :nterr l -beut vour motel, L x ( [‘6 We _ssure you that any information yea g;ve us during the interv1ew hill gzr;“ ‘ “ ‘;1 LC :jc'tiijai anvwnere in connection with you or year mite}. fer azior you give will be kept strictly cnrf. ‘ fl study of if»): kl The findings of the overv the ownership and management of selected licaigaa not will be sent to you when the study is completed if y:t grant us a personal interview. We sincerely hope ire findings will be of interest to you. IKE—635:} '__‘—_l .v-J “up a.-._ A [0 F—J Ul We do urge you to return the card indicating that you will grant a personal interview. Your help is needed. If you return the enclosed card indicating that you will grant an interview, arrangements for date and time of the interview at your motel will be made by mail or phone in the near future. Sincerely, Douglas C. Keister Instructor p.s. A preliminary questionnaire, part of this study, was mailed to you earlier. If you did return that questionnaire, we thank you very much. You will receive a copy of the findings in the very near future. 5. The Personal Interview Procedure -m Post Card Name of Motel: Address of Motel: Telephone Number offiMotel: Name of owner or manager who will grant interview: 1. Yes I will participate in the Michigan Motel Study and will grant a personal interview. I will expect to be contacted by mail or phone in the near future concerning appointment arrangements. 2. No i can not grant a personal interview and do not wish to be contacted. 6. 217 The Personal Interview Questionnaire QUESTIONNAIRE Name of Motel: Address of Motel: Telephone Number: Name of Person Interviewed: Position of Person Interviewed: GENERAL INFORMATION 1. 2. Total number of rooms: Your motel is: 1. independent 2." chain 3. franchise 4. affiliated Services offered: 1. rooms 2. restaurant 3. bar - 4. swimming pool 5. other (specifyi City: Location: 1. downtown 2. suburbs 3. country Year motel was built: If additions were made to the motel, 1. once 2. twice 3. other (specify) Number of units added: they were added: 218 9. Business is a: l. proprietorship 2. partnership 3. corporation __ 10. If affiliated, what organization: 11. If affiliated: l. franchise 2. chain —-g——.——__.-a— 12. Does the cost of affiliation pay for itself financially: 1. yes 2. no _ 3. not sure 73. Or what was the decision to affiliate or not affiliate ‘ f'i: _- .- l-—w.L—;‘w_-;'.~_-n..mm _‘ -——. ... -. .-. .‘ . .. ‘3. MANAGEMENT 14. What was ownerls previous business experience: __m- —.—--.. - 15. What was manager‘s previous motel experience: -—4 _. _.. ...—...“..- 16. What is the total number of fullmtime employees: M-A pm“ .1, .‘l a- . 1mm . ~\."‘ {.032 . 17. 18. 19. 20. 21. 22. 23. 2A. 219 What is the total number of partwtime employees: What is the number of supervisory personnel: Do you have an organization chart on paper: 1. yes 2. no Are the owners active in management: very moderately seldom not at arr: tqub-J there a hired manager: 1. yes 2. no l>—-4 Who sets the operating policy: 1. owner 2. manager 3. department Read A, other (specify) Who relieves owner/manager for time off: What is owner/manageris educational background: 26. 27. 30. 31. 32. 220 What is your source for maids: Who hires the maids: How are maids trained: Who trains the maids: What is the major problem with the maids: When is a room deemed clean: ..—-.-_n-J.L- my .— Is there a written standard for room cleaning: 1. yes 2. no Who inspects the rooms: J"-_-th ‘. 33. 34. 35. 36. 38. 221 How often are rooms inspected: How many years has present manager been on Job: How many managers has the operation had: Which of the following individuals have the authority to hire and fire: 1. owner 2. manager 3. department Head - r 4. other (specify) 9 Are employees informed as to whether or not the operam tion is profitable: 1. yes 2. no It. ' ...) _ . ' ‘g‘. ." hunt I'. s_ . If the housekeeping department needs another maid, who decides if she will be hired: 1. owner 2. manager 3. executive Housekeeper 4. other (specify) ACCOUNTING AND FINANCIAL 39. MO. 41. 42. Is there a planned program for replacing furniture and fixtures: 1. yes 2. no What per cent of the annual profit is reinvested in the motel: ' ___75 What is the percentage of occupancy (total annual rooms occupied divided by total annual rooms available for sale): What is average rate per room available for sale (total annual rooms income divided by total rooms available for sale): 43. 42+. 45. 46. 47. 48. 49. 50. 51. 222 What is average rate per room occupied (total rooms income divided by total rooms occupied): Most of the money for purchasing the motel came from: 1. proprietorship ' 2. partnership 3. stockholders 4. mortgage firm Why did the owners invest in motel instead of other f investment: g What was the source of money for the down payment by the owners: 1. savings 2. inheritance 3. other Approximately what percentage of purchase price was: 1. mortgage money 2. ownership money % 96 Who holds or held the mortgage: 1. bank 2. private Individual 3. insurance company 4. other (specify) What is the rate of interest on mortgage: % What was original length of time for mortgage: 3 years. Was there a second mortgage on motel: 1. yes 2. no 223 Was a second mortgage used to finance the purchase of furniture and fixtures: 1. yes 2. no _ 53. Is the property leased: 1. yes 2. no 5A. If the property is leased, is it leased by sale leaseback: a 1. yes i 2. no f 55. What method of depreciation is used on the building: § 1. straight line __ 5 2. sum of years' digit ? 3. declining balance 56. What method of depreciation is used on furniture ! and fixtures: 1. straight line 2. sum of years' digit 3. declining balance 57 What do you really feel is an adequate return on motel investment: 75 79 Is the motel earning an adequate return on owner's investment: 1. yes 2. no 59. Is the motel currently operating at a profit: 1. yes 2. no 60. Do you have a budget: 1. yes 2. no MARKETING 61. Do you advertise by: 1. direct mail 2. radio 3. television 4. road signs O\ {\3 (TN CU 224 5. internal advertising (guest room menus, signs, etc.) 6. other (specify) Which method of advertising do you feel is most effective: have personal contact with your guests: very much some 3. seldom“— 4. never Do you Me _n. Do you budget a specific amount of money for adver~ tising purposes: 1. yes 2. no Do you budget a percentage of sales for advertising purposes: 1. yes 2. no 3. amount How is the amount to be spent for advertising decided upon: Who are your guests: 1. salesmen 2. tourists 3. other (specify) Do you have a commercial rate: 1. yes 2. no m ———.———u——— 69. 70. 72. 74. 225 Why do you have or not have a commercial rate: What do you feel is your best potential source of new 1 business: ‘ Whom do you feel is your competition: What arrangements are you making to meet your competitit,s What do you estimate is repeat business 1. 10% 2. 2095M 3. other % (specify) Do you consider affiliation an important form of advertising: 1. yes 2. no 226 75. What is your major problem in the operation of your motel: "Illiiiiiiiifliiiiiif