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Would You Run a Small Summer Resort? Here’s What It’s Really Like

December 24, 2014
by Steve Gillman
Contributor
lake house

Do you dream of owning a small hotel or resort on a beautiful lake, the kind of place where customers return again and again to go fishing, swimming or just to relax and enjoy the surroundings?

Running a small hotel or bed and breakfast is a common fantasy, and one that Chris Gillman and his fiancée Terie Drews brought to life for themselves: They bought the Bear Paw Inn in Michigan, which is next to not one, but three lakes. Their hotel has eight rooms, plus two cabins and a 1,500-square-foot residence. What did they pay for their new business? $55,000.

Curious about the reality behind the dream of running a small hotel? I spoke to Gillman (full disclosure: he’s my brother) about the couple’s experience.

How to Buy a North Woods Hotel for $55,000

The couple wanted a hotel in a wilderness area, preferably within a day’s drive of their home near Traverse City, Michigan. To make their dream a reality, they took out a mortgage on their house prior to starting the search, figuring they could get a better deal on a property if they were able to offer cash. Drews would continue with her teaching job while Gillman would run the hotel, with help from their kids when school was out.

Their search started online, Gillman said, because, “Between the internet and a phone you can find out almost everything you need to know to rule out a lot of properties.” In fact, the Bear Paw Inn was only the second hotel they looked at in person. It’s in a hilly part of Michigan’s Upper Peninsula near a state park.

A credit union had foreclosed on the hotel and it had been empty for years. Gillman knew from previous real estate experience that financial institutions like simple deals “with no contingencies. Here is the price… yes or no, we can close tomorrow,” he said.

To buy without inspections or other contingencies and still be safe, it’s crucial to look over the property carefully, estimate the costs of necessary repairs and updates, and make a very low offer.

“If something was uncertain, we assumed the worst,” said Gillman. “In fact, we pretty much assumed all the major systems would need replacing or major repairs. That way, if everything went wrong, we would still be within our budget.”

They offered just $40,000, even though the bank was owed $220,000 by the previous owners. “Yes, it was a really low offer, but all they can do is say no, and we had to leave room for negotiation.”

The bank did not respond right away. Gillman said, “The process took a little longer than average, from offer to close about 3 months; of course it was a credit union and they were losing a lot.” When another bidder entered the picture, Gillman and Drews agreed to pay $55,000.

Preparing a Property for Guests

In May 2013, with ice still on the lake behind it, they started to prepare the hotel for a summer opening.

Pipes had frozen and burst, and there were broken toilets, windows, doors, sinks and gutters. It took Gillman and Drews more than four weeks of work to get the first room ready to rent, though several friends pitched in to help them with the labor.

Thinking that doesn’t sound so bad? Gillman was quite frank about the 16-hour days he spent fixing up the hotel, sometimes crawling through icy water.

“One day, I spent 13 hours under the house alone in the crawl space rebuilding the sump pit and de-molding and pulling out pipes, gloves, old filters; all sorts of things they left behind from previous repairs,” he said.

The work — and the expenses — continued after the place opened. They fixed the hotel sign, bought new televisions and blankets for the rooms and removed debris from around the property. They also bought sheets, towels and pillowcases, which Gillman says was a mistake:

I sometimes do laundry for two days straight after a busy weekend, so I highly recommend hiring a linen service, which I’ll do next season. For a small place like this it’s only about $50 per week to have them drop off all the clean sheets and towels you need and take away the dirty ones — it will save me so much time.

What did all of this cost? Gillman figures they spent about $30,000 getting the hotel ready for their first season, plus another $12,000 to finish renovations and repairs the second season. However, he says the cost could have been much higher. He did a lot of the work himself to save money, and several friends came to visit and assist in repairs.

How Do You Market a Small Hotel?

A late start and ongoing renovation projects made for a rough first summer in 2013, but Gillman says they did well during their 2014 season, from mid-May to mid-October. They’ve spent less than $100 on advertising so far, and they still filled the rooms during most of their 2014 season.

Here’s what Gillman and Drews use as a marketing plan. It’s simple, but has been effective for them so far:

  • A lit sign
  • A functional website with good photos
  • Social media
  • Locatable with a GPS

This last consideration is key, according to Gillman. They registered the inn’s name and address with Navteq, one of the major mapping companies from which GPS manufacturers get their information and updates. This technique means that visitors searching for nearby hotels are more likely to discover his inn.

Gillman promotes the hotel as a great place for family vacations, explaining, “I have designed the feel of the facility to be like you’re coming to your own camp.” In the evenings, guests can gather around a fire pit to roast marshmallows, and Gillman provides board games and playing cards for visitors to enjoy.

He also noted that the inn’s access to water is a big factor in its success. “There are cheaper hotels nearby if someone is just needs a place to stay while passing through, but the water makes us somewhat of a destination hotel. Guests can rent canoes or kayaks, or fish right from the yard,” he explained.

Involving the Whole Family

Gillman and Drews have a little help from their four children during their summer break from school. Daughter Jackie, age 11, cleaned rooms over the summer, earning a paycheck and tips. She also learned how to take reservations and run credit cards. Sons Alex, Blake and Andy pitch in too, Gillman says, “when they aren’t out in the woods.”

Gillman thinks it’s a good idea to make the kids spend some time working in the business. He says the experience “provides a more real-world work environment for them compared to just raking leaves.”

What It’s Really Like to Own a Hotel

What do they like best about being hotel owners? Gillman said they love meeting a diverse and interesting group of people.

But there are some problems with being a small operator. For starters, Gillman often runs the hotel alone while Drews holds down the fort at home — five hours away.

He also pointed to the sheer amount of effort it takes to keep everything running smoothly. The work is neverending, he says, and if he wants to leave for a day or two he has to close the hotel.

The problem, Gillman said, is the hotel’s size. “It isn’t a large enough operation to afford employees,” he said. While the small size appealed to the couple, it only makes financial sense if they do all the work themselves.

Owning and running a small hotel isn’t for everyone, but for now, Gillman and Drews are enjoying their unconventional business.

Your Turn: Have you ever dreamed of running a small hotel, B&B or resort property?

by Steve Gillman
Contributor for The Penny Hoarder

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