Shutting Down a Motel and Costs Involved
There are numerous reasons why a profitable motel might shut down in the rise of economic development in the region. One of the major reasons is the tendency of increasing operating costs due to the increase in the value of the land. An increase in the value of land is often associated with an increase in government tax on the property. These taxes may be enormous to the point where the overall profitability of the motel is heavily affected to a point where losses are attracted to the business (Vitez, n.d). To avoid such losses, most proprietors end up shutting down their motels.
Economic development often comes in handy with industrialization, which destroys the ecosystem. Motels attract local, regional and international tourists to enjoy the services at the same time the environment that the motels are located. Industrialization is often associated with air and noise pollution, which disrupts the environment. This is most likely to reduce the number of visitors visiting the motel thus reducing the overall profit of the motel. This facilitates the closure of the motel to avoid such losses.
As the land value increases to extreme values, it becomes profitable to liquefy the business and use the money to open several motels in other profitable regions. Economic development is often associated with competition that results in a reduced market share (Vitez, n.d). Reduced market share means reduced profits hence shutdown of the motel and relocate such business elsewhere help to avoid more losses.
The costs that are normally associated with shutting down such a motel include costs associated with hiring a lawyer, fixed costs of the business, shifting items from the motel attracts costs, and selling of properties at lower prices constitute shutdown costs. There are also labor costs associated with moving properties and wages to the workers of the motel several months from the day of closure due to cutting down their employment.
References
Vitez, O. (n.d.). Reasons for Closing a Business. Retrieved from http://smallbusiness. chron.com/reasons-closing-business-3673.html.