In the Smokies, size matters

[Collin Hays]

I have watched, with interest, the rental activity of each cabin in our portfolio since 2019.  We have a number of properties that have remained pretty consistent in rental income throughout that time.  I will profile one of those today.  It's called Bare Hugs, and you can find it on our website if you want to have a look at it.  Bare Hugs was purchased in 2018 for $270,000. It is only 900 square feet - a one bedroom + loft, in Blackbear Falls Resort, and has a wonderful view.  Repairs and maintenance are probably $3,000 per year - not a lot of moving parts to this cabin.  

Here is the rental revenue, by year, for Bare Hugs:

2019  $31,712

2020  $39,028

2021  $46.322

2022  $51,412

2023  $53.364

2024  $50,817

The consistency of this small cabin is astounding. We have several others that are similar. Meanwhile, the giant cabins have seen some significant declines in the last 3 years. Perhaps a good ROI strategy in the Smokies is, keep things simple. You don't need a 3,000 square foot cabin to make money. Bare Hugs is a money machine, and looks to stay that way.

[Collin Hays]

Quote from @Matt Mertz:

@Collin Hays Thank you... this is interesting info.

What have you found are the major differences in daily operations between the small vs large cabins?  Does the higher occupancy cause more cleaner scheduling headaches?  Do guests complain about the hot tub not being hot enough on check in?

We have a big cabin (sleeps 16) now which has been doing very well.  We're in the process of building a small 1 bedroom because we wanted to bookend both sides of the market (and because construction prices have gone up).  I figure the high turnover will be the biggest adjust we'll have to make.

Small cabins have far less repairs and maintenance costs as a percentage of total rents. That’s because the guests of these cabins typically aren’t there much.  The cabin isn’t the attraction, but more of a welcome place to sleep and enjoy a cup of coffee.

Large cabins are trying to be the attraction - almost like a mini amusement park.  Massive kitchens, theatre rooms, game tables, arcades, pools, big TVs.  

Thus, guests (and lots of them) are present at the property a lot, which means a lot more wear and tear.  

 If hot tubs are emptied between guests and you have a same day turn, there is no way that the hot tub will be ready at arrival.  

Another common complaint at big cabins is “the refrigerator is isn’t working”.  Actually it is, but when you keep it open for 10 minutes and then stuff it with goods you just bought at the grocery, irs going to take it 12 hours to get everything cooled down.  Basic physics.