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Land Value Increase Problems

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Why might a profitable motel shut down in the long run if the land on which it is located becomes extremely valuable due to surrounding economic development? What kinds of costs are involved in making a decision to shut down?

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Solution Summary

The solution looks at reasons a profitable motel might still be shut down if the value of its land increases due to economic development in the surrounding environment and the costs and decisions to be paid and made here. 369 words.

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Why might a profitable motel shut down in the long run if the land on which it is located becomes extremely valuable due to surrounding economic development?

If the hotel owner conducts a profit analysis and finds that even though the hotel is profitable, the income that could be generated from either selling or leasing the land is more profitable than the hotel profits, there is a great incentive to stop the hotel operations, shut down the hotel and lease/sell the hotel/land.

Because the area has been built up so heavily by economic development, the owner, based ...

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