Rejuvenation possible but not easy
Breathing economic life into one gasping motel, a South Lake Tahoe developer has proven that some failing properties can be restored to health within the current regulatory structure.
The transformation of the struggling Silver Dollar Motel into the successful Chateau Suites was not easy, according to the owner Scott MacDonald. But it was doable.
“We were lucky, very lucky,” he said.
“I still have red tape that hasn’t been unwound. … The (Tahoe Regional Planning Agency) is a tough process, a very tough process.”
Tough, but possible.
When McDonald purchased the 23-unit Silver Dollar Motel more than a year ago, its average annual income was $36,000 during a slow year – of which there were many – and $54,000 during the best years.
After extensive remodeling, Chateau Suites opened June 1, 1997. MacDonald hoped he motel would produce $120,000 in income within a few years.
“We did our first year at about $120,000,” MacDonald said. “This year, we’re hoping to do $160,000.”
The funds for the remodeling project came by decreasing the number of rooms on the property.
MacDonald eliminated nine rooms by combining small rooms into two-bedroom luxury suites, some with fireplaces and hot tubs.
The rights to those nine units, known as tourist accommodation units or TAUs, were sold to the city for redevelopment projects in other parts of town.
Recently, MacDonald combined several junior suites into larger units and hopes to sell those units for additional remodeling projects and other investments – perhaps another motel closer to Stateline.
Now, with 13-rooms compared to the original 23-rooms, the suites are providing substantially more income to the owners and the city.
“If we’re doing $160,000 and 10 percent is going to the city, that’s $1,600 (in room tax revenue) compared to what they were doing before.”
The project could have been done with long-term loans and high monthly payments but sale of the motel units, despite agency headaches, providing a financial advantage.
“It was chore to pull it all together,” McDonald said, explaining the problem with getting all the agencies on the same page at the same time. “I wouldn’t have been able to do the project without Jaye VonKlug and Mark Patel.”
VonKlug, the redevelopment manager, helped free the motel-unit funds for the remodel at a time when TRPA delays could put the project in financial jeopardized, he said.
Patel, owner of the Tradewinds Motel, a marketing consultant and now MacDonald’s partner, had the marketing know-how to get the Chateau Suites off to a running start.
With only a year track record, occupancy rates last winter averaged 82 percent and during June and July, 83 percent, MacDonald said.
“We did better during the slow months than expected. I wanted it to slow down so I could get some work done.”
MacDonald feels the Chateau Suites could do even better if some of the struggling motels are eliminated.
“We do well and we would do better if we didn’t have the low-end competition,” MacDonald said, noting that he saw occupancies go up when several small motels were recently purchased by the city for demolition. “Some properties have definitely outlived their life and need to be taken out.”
Many of the owners of those motels would also like to sell out. Remodeling successes such as the Chateau Suites are few and far between.
Even fewer motels are located in areas where the city is interested in their purchase and demolition to make way for other uses.
Many small motels are on property that could be used for commercial businesses. For now, the transfer of motel units to commercial space is a regulation sticking point.
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