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Annual Motel Market Wrap Up: 2019

At the end of each year we take a look back at how things unfolded and whether the crystal ball we have in the back office was accurate.  Whether our predictions on how the market would perform were on point, or way off the mark.

This time around the market performed pretty much as we expected.  It started out similar to the previous year but became a little more subdued towards the backend.  Looking back, 2018 was always going to be a tough act to follow.  The market is a fluctuating dynamic and can only stay at the same level for so long.  In saying that 2019 has been busy although it has become more of a buyer’s market as the year progressed.  External influences have played a role in the market’s performance with financing acquisitions proving more difficult for some, insurance premiums rising and in some cases insurance companies being unwilling to insure certain properties or localities at all.  The appetite of investors has been there, however for some, those are very challenging hurdles to overcome.

As I mentioned 12 months ago, 2018 shot the lights out.  2019 has been solid without being flashy.  Quality, well-presented properties and businesses have been selling.  Yields have been under pressure in some regions, particularly when properties have been in need of refurbishment.   

The first quarter started out very strongly with much activity that had been building up for an extended period in mid to late 2018.  There was a large number of sales concluded with solid yields in both freehold and leasehold markets.  Many owners that were considering selling early in the year decided to take a hold and view approach to see how the market would unfold as the year progressed.  The second quarter saw a more subdued period, with fewer listings available on the market the choice was not as great.  During the third quarter there was a lot of negotiations happening however concluded sales had dropped off.  Buyers were still very active but for various reasons buyers and sellers were not finding middle ground on pricing as they had previously.  The final quarter of 2019 saw activity decline and the buyer’s market was in full swing.  There have been numerous contracts pending settlement however the conditionality periods seemed to extend and extend, again largely due to external influences.

As mentioned last year, solid gains in economic prosperity for areas of the state that had been down have been welcomed.  Increasing occupancy rates have resulted and room rates are now continuing to see pressure to increase.  The resources sector has gone ahead quite well.  There has been strong growth and demand for labour in regional towns within South West and Central Queensland.  Demand for accommodation has grown considerably over the course of the year.  Emerald is one example where occupancy rates on the back of demand have increased month on month all year.

The tourism sector has been a little subdued in areas of the state with total visitor numbers being down on last year in some areas around 5%.  International visitors however have been down, but less than 1%.  The Australian Dollar has been sub 70 cents (around 67-69 cents) late in 2019, however this time last year was holding around the 70 – 72 cent mark.  The year before it was noted that it was “maintaining a mid 70’s cent mark”.

Again, leasehold motel transactions have been the quietest sector of the market which was similar to last year.  There have been reasonable enquiry levels however access to finance has held many back from being able to complete transactions.  The first-time entrants to the industry with no experience have needed to pursue suitable financing arrangements more aggressively than in the past.

Investors have continued to seek the comfort that freehold motels offer with sales being recorded at all stages throughout the year.  Good quality freehold properties with up to date trading data, priced correctly, and presenting well are selling.

Freehold passive investments have continued to be sought after by investors.  The low bank interest rates available on both loans and deposits has seen demand soar for motels under lease.  This high demand is expected to continue with the expectation of low interest rates to remain.  There has been pressure on buyers to meet the time frames of special conditions within contracts of sale for fear of sellers terminating in favour of under bidders.

In contrast to 2018, this year not all contracts of sale have reached settlement for a variety of reasons.  Again, external factors have been part of this and in many cases, buyers were still wanting to complete contracts however for different reasons were unable to.

All of us here at Queensland Tourism and Hospitality Brokers wish you a very positive and prosperous 2020 across the accommodation industry.

Selling in a Challenging Market

Markets fluctuate up and down all the time.  The number of variables that play a role in this are far too many to cover.  Some markets are more liquid or fluid than others, again for different reasons.

The stock market is an example of one of the most fluid markets and can change in seconds on the back of one company announcement.  Shares can be bought and sold in seconds depending on the price.  The residential property market is not as fluid and takes a bit more time to react.  There may or may not be a buyer immediately in the market as soon as the property lists for sale.  It may take days, weeks or months to sell depending on many variables such as the strength of the market, access to finance, price etc.  The commercial property market and the businesses market are a little less fluid again, with the market taking a little longer to react therefore the selling times can be more protracted.

One must understand the market they are in when considering offering their motel or accommodation business for sale.  Price expectations rely on how a seller and their advisers around them understand where the market is currently tracking and therefore informed decisions can be made accordingly.  Everyone wants to sell in a strong market; however, life doesn’t always allow this to happen.  One can only prepare and do all they can given the circumstances at the point in the cycle where the market is when they come to sell.  As with anything, being armed with as much relevant information as possible is key.

As always, preparation is paramount.  The sale of any type of business requires no less.  Let’s look at this in 3 parts: -

Financial Statements - Too often a quality motel business and property will not sell due to the financial statements not being prepared correctly.  Perhaps not inaccurate, but poorly presented.  I was very happy recently to hear a solicitor advising their motel client that their financial statements did not look professional enough to expect a strong sale price to be achieved.  This is obviously not their area of expertise, but they simply put themselves in the shoes of a buyer and felt the presentation would not pass the “pub test”.  They were advised by both he and I that they needed to have their Accountant prepare a professional and accurate set of financial statements before offering the motel to the market.  The seller was happy that his management accounts were accurate, and they would satisfy a due diligence.  The seller knew that himself, but how could anyone else?  Presentation plays a big role, especially when the market is soft and there are fewer genuine buyers seeking a motel investment.

Property - Physical presentation must be at its best.  Buyers in a soft market are looking at everything with a magnifying glass.  Why?  Because they can in such a market.  They have more choice and less pressure to act with less risk of the property being sold out from under them.  Repair and maintenance and cleanliness must be in order.  Potential buyers will simply move onto the next one if they are not happy with poor maintenance practices, such a sagging bedding, poorly painted surfaces, rusty old box air conditioners, wear and tear that has not been rectified, etc.  Any attempt to “pass on problems” to the next, will not be acceptable in such a market.

Legal - Have all contracts, agreements and statutory requirements tidied up so there are no outstanding issues that will scare a potential buyer away, either early on when they start looking into the business, or well down the track when an issue may cause a Contract of Sale to collapse.

Finally, marketing of the accommodation business and/or property needs to be directed to the target market.  Marketing funds can be wasted very easily when not placed correctly and directed at the target market.  Seek advice from professionals as this can be a bottomless pit if it’s not hitting the mark.

With the items mentioned within this article, a strong market will be more forgiving on the finer points, however in a soft market the importance of each area is that much more heightened and potential buyers do not need to accept anything less.

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

Motels: A Great Value Stay

In my continual travels around Queensland and stays in and visits to motels (which without exaggeration would have to be approaching a thousand stays over the last 24 years in the industry), I continue to see just how good the product and service of the motel is.  I can say without any reservation (pardon the pun) that more often than not, I come away from my stay extremely happy and thinking, what great value that was.

The difference between a well operated motel and a poorly operated one is very evident.  The are some motels in need of a little TLC and their time comes around at some point (unless the “highest and best use” becomes an issue of course).  However, most motel operators understand the industry and what the guests in their particular market segment demand for their dollar.  The room that is on offer for $85/night against the one at $185/night will differ considerably in size, standard, services available, etc.  It has to, there is a $100/night difference.  What I have found is that each has its own personal characteristics and niceties that make that stay one of a kind, enjoyable and good value for money in some way.  Perhaps it was the surprisingly large room for the dollar being charged, which was unexpected as I walked through the door for the first time.  Maybe it was the renovated bathroom that had been completed by the new and enthusiastic owner/operator since I stayed at the motel the last time.  Perhaps the high quality bed that helped get a good night’s sleep after a long drive or busy day.

It is often human nature, but people tend to focus on the negative with an experience they have, good or bad.  “I had a fantastic time riding a jet ski at Hamilton Island, but it was a bit bumpy.”  Sound familiar?  This is no different with accommodation.  “I prefer a bar of soap, not a pump system.”  The smallest of concerns that are not really an issue in the bigger scheme of things, seem to become stories that get repeatedly rolled out whenever the opportunity arises.  As opposed to focusing on the positives of the experience.

Looking at it from a different perspective I believe the value for money available to travellers requiring short or medium term accommodation throughout Queensland motels is excellent.  Forget turning up to accommodation booked online where there is no manager onsite, the key is not where it is supposed to be, the place is dirty or does not present anything like it did online.  The value for money a guest receives in general terms at a motel facility in Queensland is exceptional in my opinion.

The room rates throughout the state vary greatly depending on location, standard, etc, etc.  The amount of value for the guest packed into a let’s say $80 - $120/night studio motel unit is a lot when you break it down.  Let’s look at just some of the absolute basics of what one gets for their hard earned $80 - $120 (and less in many cases).

  • On site manager who is at the guest’s beck and call, providing security and attending to any personal concerns, maintenance problems or requests on the spot that may arise during the stay
  • 20 hours of accommodation – 2pm check in to 10am departure and often longer than that if required
  • Freshly laundered linen and towels
  • Tea, Coffee, Milk and Biscuits
  • Kettle, Crockery, Cutlery and toaster for breakfast
  • Kitchenette for meals (in some cases)
  • Table, bench, chair and couch to work from or relax
  • Television with free to air or a Foxtel or Netflix subscription
  • Refrigerator
  • Ensuite with soaps and shampoos, etc
  • Air conditioning
  • Alarm clock
  • Cupboard hanging space and ironing facilities
  • Under cover or non-covered off street carpark
  • Pool and outdoor area
  • Mini bar or convenience item facilities
  • Wifi access (often free)
  • Laundry facilities
  • Rubbish disposal

When you break that down it seems like fantastic value for money to me.  The value to the guest of having a manager on site for piece of mind for security, and if something needs to be rectified or fixed it can be immediately, is worth the room rate alone.

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

Book Direct

Finding a “satisfactory” balance between OTA (Online Travel Agent) driven bookings and direct bookings is a dilemma.  With excessive commission rates, it can feel like a double edged sword to be listing units with an OTA, receiving the booking, but having to pay a high commission rate that would otherwise be avoided with by direct booking.

This has led to the ongoing argument about fairness in the market in relation to OTA’s and best practices.  Dick Smith recently brought the accommodation sector’s issues to the attention of many who were unaware of what the industry faces.  It had an immediate affect with many of those previously unaware booking directly.  What steps can moteliers take to be more proactive in driving direct bookings as well as getting more ‘bang for their buck’ with the use of OTA’s?

We live in the digital age, it’s where people research, socialise and commentate, book and rate.  The first step to driving direct bookings is to have a user-orientated built website.  Build it for the market.  It needs to be fresh with professional, good quality photo’s that sell the property.  It takes only a few seconds to form an opinion and these are most often based on the photos and presentation of a website.  Make it easy to navigate through the pages, easy to book and easy to enquire.  Generally we are told the longer someone spends on a website, the better, however if a prospective visitor can’t easily find what they want to know, they’ll quickly go somewhere else.  If they come to a page from elsewhere and they can’t quickly and easily book or enquire, then they’ll either go back to an OTA site and do it there, or to a different motel altogether.

Use a webpage to upsell and put a very clear call to action that makes it obvious to potential guests that if they make contact directly, they will receive the best possible rates. It’s still not common knowledge that consumers can get better rates directly through a property than if they book using an OTA, so the website has to compel them to make contact.

An excellent website is only the first step, people need to be able to find the motel.  Maximise spending with OTA’s by utilising listings on their sites to the most advantage.  Consistency of photo’s and details on any OTA or third party website should all be of a professional standard and should ideally all be identical.  This helps to cement a brand and image and makes the motel easily recognisable across all of the various platforms.

Best price offers.  Whether nonsense rate parity agreements prohibit motels from offering cheaper prices or not, either way, consumers need to be prompted to contact the motel directly for the best price.  Human nature means we are always out to get the best “deal” we can, and people will always be more inclined to contact directly for this.  Education on the web or at reception is the key.

The OTA’s giving the billboard effect, means that simply by offering availability through OTA’s it will ultimately drive traffic back through your own website.  The big OTA’s have mammoth marketing budgets and their sheer size and structure mean that they almost always rank at the top of internet searches.  Take advantage of their marketing budget and brand awareness by ensuring a professional looking listing that gives an excellent first impression of the property amongst their other search results.  Make sure content is fresh and up to date and consistent with everything else on the web.

Trends such as a meta search drive direct traffic and as technology moves with the desire for instant gratification, we have seen the rise of comparison sites.  Where a consumer will make a booking through an OTA, a comparison site crawls the web for all available information relating to a search and provides realtime information on rates and availability, so that consumers can easily see in one place everything they want to know.  They can then quickly rule out or act upon motels of interest, either going directly to their website or if they see a more appealing option on an OTA, then heading there.  Here is where their attention can be captured so that they head direct, rather than to an OTA.  The first step is to ensure that the site is enabled on the Google platform and that all details are up to date and correct.  This should not be a ‘set and forget’ exercise.  To regularly display in the results one needs to make sure the realtime data is correct and reflects what is out there and available on other sites.  Again, consistency is a key factor here.

Finally, use direct marketing to your advantage.  We are limited by what we can offer on a website and other third party sites when there are agreements with OTA’s, however the ability to market directly to social media followers, previous guests and a database is very relevant.  Take advantage of direct marketing with special offers that keep the motel in the front of mind, so that if they are looking to travel or have friends or family who are, the motel’s name is there, ready for them to enquire or recommend.  Building loyalty is a big one.  No matter how a guest came to the motel, treat them as a priority and take ownership of their booking – leave them with no doubt as to where they want to stay the next time they visit the area thereby driving them to book directly next time.

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

Motel Opportunities Abound

It is always a positive sign in any industry when those experienced investors and owners already involved within that industry are looking for more acquisitions within.  That is the situation where the motel and accommodation industry is now positioned.  Those who know the business and are already involved are looking to expand.  No different to the caravan park industry over the past two years.  Most caravan parks sold by QTHB during this time have been to existing owners of caravan parks.  Those looking to expand their portfolios by acquiring more market share, either in the same region they are already active or further afield.

This provides very clear evidence that those already active have a very positive outlook of the industry going forward.  It helps to confirm that for those who are considering entering the motel industry or those looking to expand their motel interests, the time is now!

The motel market is no different to any other in its fundamentals.  It has its ups and downs and different stages of the market offer different opportunities to those within it and those wanting to enter.  Selling motels over the long term has allowed me to witness many changes within and many very different states of the motel and accommodation market during this time.  Over the past 24 years, that I am aware of at least, every region has had its day in the sun at some time and different tenures of ownership have also had their defining moments.  At times the market has favoured sellers, other times it has favoured buyers, and for the rest of the time it offers opportunity to all in some way.  On many occasions, investors have made their own opportunities that have defied the status of the market at that time.

Picking the market is always a difficult thing.  If it was easy, everyone would be experts.  “When should we buy or when should we sell, is now a good time or do we wait?”  What one can do is work on the information they have at hand, and make a decision based on the facts and then draw conclusions as to when they believe is the right time to move.

Within the current motel market there are some excellent buying opportunities available at present.  Many people who contact us to discuss buying a motel say the same thing, “we do not want something with no upside or operating at full capacity, we want room to improve the business”.  Each business must be assessed to suit the needs of each investor’s needs, and one of these needs is to be able to build up a business to improve it in some way.  Changes in the various local economies throughout the state have created these buying opportunities.  Whether it be, improved business conditions in a region that will allow for future growth, or alternatively a recent decline in demand for accommodation that has created a potential future, buy low, sell high scenario.  This is always attractive to seasoned investors.

Any lack of confidence within the market due to the economic changes and perceived instability both home and abroad have not helped the market in any way.  It has seen investors being cautious about entering new industries they are not entirely familiar with.  Those already familiar with motels know the long-term strength of the industry and are always looking for acquisitions of good quality motels.

What makes a good motel buying opportunity?  Genuine motel buyers in the market have continued being active in pursuing motel businesses that offer them the main fundamentals, quality presentation, consistent trading history, good locations/positions, and reasonable occupancy rates based on good room tariffs.  These fundamentals for motel acquisitions do not change, no matter what the state of the economic climate.  If one of these fundamentals is not reading well and there is an opportunity to improve it, that may be of more interest to one investor than another.  For example, occupancy rates have dropped however room rates have been maintained, and there is basis for future potential to increase market share to build the occupancy rate up.  Opportunity available and waiting!

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

Room Rates - Supply and Demand

The economic forces of supply and demand determine the price levels of most products and services.  It forms the basis of the Laissez Faire economic system (free from government intervention) under which we live and operate… most of the time.  Supply and demand are an everchanging dynamic as each go up and down with human actions.

Accommodation room rates go up and down as a result of all sorts of activities created by people and external factors.  A couple of simple demand examples include, a big event being held in a locality on any given day or a large industry increasing or decreasing their activities in a region, just to mention a couple.  A couple of simple supply examples include, new short-term accommodation units being built and coming online, or an accommodation site being redeveloped for its highest and best use purposes thereby taking units offline.  There are literally hundreds or more different actions that change supply and demand.  Supply is generally the slower mover however demand is more dynamic, changing from day to day.

There are differing opinions on this however in the main it seems to be that most believe short term accommodation room rates must go up and down with supply and demand changes.  As the old saying goes “make hay while the sun shines”.  You can consider scenarios in the short term such as a busy weekend or week and long term such as a booming industry over a ten-year period as examples.  If there is a busy weekend for an event or an annual event perhaps and the available units in an area can be sold 3 times over, will the room rates for that period be the same as when things are quiet?  When things are quiet do the room rates stay where they are, or do they drop in order to meet the lower demand?  Peak and off-peak seasons are another example.  Holiday complexes always advertise high season and low season room rates.  They are simply going up and down with the relevant supply and demand for that time of the year.

Having seen situations where it is believed that rates should stay the same no matter what the demand is, those situations did not end up working out well.  Loyalty to guests is something that gets mentioned in these discussions.  Of course, this is a good thing, however it can only be sustained up to a point though, especially considering long term scenarios.  If the room rates are not raised during the busy times, then unfortunately come the quiet times, they cannot remain where they are either.  Even though the guest may still wish to stay at that motel to repay the loyalty of the lower rates in busy times, their company may move them on to a cheaper property in the quieter time, as the company does not have the indebted responsibility of loyalty in return.  This is where not moving room rates up and down with supply and demand can end up being a very costly mistake.

Looking after return guests and loyalty is a fantastic thing.  It is what builds the strength of any accommodation business.  Finding the right balance here is the difficult part.  Being able to increase room rates with higher demand and keep loyal regular guests happy around this, is not an easy thing to do.  The juggling act of any business operator is not an easy one to get right, or even close to.  Using room rates as effectively as possible must be the goal though.

Low room rates and under cutting are a major burden on the accommodation industry.  The damage caused by this line of thinking is big.  The thought process that undercutting the value of one’s product is the best way to sell the product is a very flawed ideology.  Why not go the other way and add value to the product to make it more attractive to the market, instead of giving it away?  If there is a low demand for motel accommodation then there is less chance of being able to lift room rates, however there is little benefit in underselling the value of the product.  Again, the juggling act.  What is the market willing to pay for the product and service?  Finding the fine line in not over pricing the product and not under-pricing it within the confines of the demand available is the trick.  What is a guest willing to pay for a neatly presented and clean motel room that offers the expected services such as, a good bed, quiet room, air conditioning, high speed internet service, etc, etc?  Therefore, what does one believe is the value of the combination of the product and service they are offering that can be achieved at a particular point in time?

Written by Andrew Morgan, Specialist Motel and Accommodation Broker

The Search has Evolved

Whether your looking to buy a small leasehold motel or a large freehold hotel, the search must start somewhere.  So where does it start?  How does one find what they are looking for

Way way back in the 1990’s, “the good ole days” those looking to buy a motel would check the newspaper on a Saturday morning and see columns of motels being advertised for sale under the heading “Hotels/Motels for Sale”.  Caravan Parks had their very own heading however there were generally only about three or four advertised compared to dozens in the Hotel/Motel section which was a combination of pubs, motels and resorts.

If the reader liked something they saw in the three or four lines within one small newspaper column, they would pick up the landline in most cases (mobile phones were in their infancy) and call the office of the Broker who advertised the motel.  Information on that motel was then posted by the Broker via “snail mail”.

Fast forward 25 years to today and things have obviously changed significantly.  The ease of finding information is simply a couple of clicks away and people can access substantial amounts of information on scores of different businesses in very quick time.  No waiting for the postman to turn up with an A4 envelope three or four days after having made the request with the Broker.

The days of advertising for the industry in the Saturday newspaper are pretty well over.  You will still find the odd agent stepping out of their field of expertise and trying to sell a motel business in the newspaper, however it is just not cost effective anymore for this particular field.  Colour photos in newspaper print were not a common thing all those years ago, but again, things have changed and advertisements via any medium without colour photos just don’t cut it from the point of trying to attract buyer’s attention.  Not only this, but they need to be large, and that makes hard copy ads very expensive.

The web offers as many full colour photos as you like and the space to write as much dialogue as needed.  The costs can be high sometimes, however in most cases can be kept to a minimum if the motel is advertised with the right Specialist Motel Business Brokers.  These Brokers are focused on the sale of motels and therefore dedicate all their time to that sector.  Their marketing campaigns are largely centred around web-based marketing which reaches directly into the target market for such a business.  Nowadays many motels don’t even see a website and are sold before being put out to the view of anyone who has internet access.

Website advertisements of anything allow for photos to be “touched up” in order to make the product look better than it is.  Most Specialist Motel Brokers present photos they have taken themselves of the property.  These photos are expected by their clients to be untouched.  As much as they want to present a property as best as possible, professional Brokers know they will be attending the site with their clients and therefore want to show the property in its real state.  The line about “things looking good on paper but when you get there it is a different story”, is not what a professional Broker wants their client experiencing.

At the end of the day starting the search with the web is the obvious choice.  This will however only scratch the surface and extend the search only so far.  The way to progress from general research to real progressive action is to speak directly to a Specialist Motel Broker.  As mentioned, many very good motel businesses that are for sale may not actually be listed on any websites, often at the Vendor’s request for confidentiality reasons.  For those most serious buyers, this is the way to cut through all the out dated information and hyperbole that can be found on the web, and get to the most up to date and relevant information available.

Written by Andrew Morgan, Specialist Motel & Accommodation Broker
Photo Credit Tourism & Events Queensland

Expected Selling Time

“Business valuers in Australia typically define market value as:
the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm's length.”
(“Meaning of Market Value” n.d.

What sort of timeframe is reasonable to expect the above to occur?  There is no definitive answer here or no one size fits all, especially where some properties or businesses are unique and don’t fit under the banner of others.

Looking at the motel industry, in general terms if a motel is priced correctly an acceptable selling timeframe will be around four months.  If the business or property is overpriced then it will most likely sit on the market for longer than this.  Again, in general terms, we believe a marketing commencement date to settlement of a Contract of Sale up to a six month period is acceptable when a motel is priced and marketed correctly.

The strength of the market will dictate market prices and marketing campaign timeframes, however the times mentioned are a good guide in most markets.  Even when markets are running hot the logistics of buying a business do take some time to formalise and complete.

External factors seem to be extending timeframes.  Delays in finance approvals lately seem to be a cause, particularly where clients are awaiting finance approvals for the Contract of Sale to progress forward.  Once finance is approved, timeframes to complete settlement have been relatively quick.

We find in the field of accommodation business and property sales often the Vendor does not wish the business to be displayed publicly for sale.  Hence an off market sale campaign is conducted.  This is becoming more common as Vendors do not wish certain individuals (who do not have a genuine interest in buying the business) to receive their business data.  This has become more relevant as accessing information online has become easier and easier as technology improves.  It allows those who either cannot finance the transaction, do not have a genuine buying interest in the business, or wish to find out information about the business or owner.  Enquirers often ask why we do not include the locations of the businesses on our website?  The answer is that quite often we do, however more and more of our clients have realised the value of confidentiality today and do not want their business compromised in any way by those who are not genuine potential buyers.

Off market campaigns will often see a motel offered to genuine buyers that the Broker is aware of and are actively seeking such a business.  These campaigns will allow a sale to occur, generally in a reasonable marketing timeframe, and the first any non genuine buyers know about it is when it shows up as a completed sale.  The old line of “you can’t sell a secret” still has some merit, however those genuine buyers that maintain a relationship with their Broker will know about it, therefore there is no secret!  It is also relevant to add that off market campaigns suit certain property types and business types more than others.  Again, there is no one size fits all.

Achieving the highest price possible is any Vendor’s goal, however stepping over the line and pricing too high is an issue.  A Seller must do their research and come to their own conclusion of value based on all the collated information.  Some pitfalls may include sales evidence that was not an “arm’s length” transaction, or incorrect information (or lack of information) that may have been provided.  The way to protect one’s self from this is to arm yourself with information on genuine recent sales of a similar nature, what is currently available for sale, how does the particular motel compare and general market information on what may affect potential buyer’s assessments of value, such as interest rates rising or falling, access to finance, economic issues, etc.

A successful sale at the highest possible price will not be achieved by sitting on the market over time.  All that will happen is the price will come down and down over time until eventually it meets the market or sells below it.  Meeting the market within a reasonable time is the best way to avoid a protracted selling timeframe and underselling.

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

Bedding has a Limit

Everyone you speak to has a horror story at some time in their life about a motel bed they slept on that was the worst bed they ever had to endure.  They had no sleep that night and will never forget it… and, will continue to bring it up when any conversation allows them to introduce it.  Sound familiar?  Allow me to paint a picture for you of an all too common scenario.

A motel guest parks their car outside their unit, they chose this motel because it looked like a good quality motel from the street or online.  They open the door after a long day on the road, ready for a good night sleep.  They comment that they are so tired they could sleep on the floor if they had to.  They look around the unit and like what they see, the room is very nicely appointed.  They look past the bed, then stop, and look back as something catches their eye.  “Does the bed look saggy....  It does...  It is!”.  To their horror, the bed is sagging in the middle and looks as though it was new back in 1999.  Albeit very disappointed with the look of the bed after the long drive, they don’t say anything to management, and proceed to toss and turn all night, resulting in the worst night’s sleep they have ever had.  The next day they leave the motel vowing never to return because of the bedding and armed with a story for the ages

Over the last 23 years of motel brokerage and in excess of one thousand motel inspections, I still cringe when I walk into a motel unit to see a beautiful room spoilt by a bed that should have been upgraded five years ago.  One of the first things a potential buyer of a motel does when they enter a room is to lift the bedspread, sit on the bed and check the bedding quality.  If the bed is sagging and well past its use by date, immediately the potential buyer becomes concerned about what else in the property needs replacing.  One of the first things asked is, “when were the beds last replaced?”

As anyone in the motel industry knows one of the fundamental items of a motel unit is a good quality bed.   Without this, you may as well throw away the HD or 4K LCD television, quiet split system air conditioner, free WiFi and all the other goodies, because that bed has now done more damage than any of these items put together can make up for.  When that guest tells one of his friends not to stay at that motel because they will not get a good night sleep, the cost to replace that bed now seems like a drop in the ocean compared to the potential business lost by bad word of mouth.

In my opinion beds can be easily replaced at a minimal cost and can be done regularly, rather than when the sag in the centre appears.  To a guest a bed is the be all and end all.  It is the difference between a guest giving the best free advertising for a motel to everyone they speak to.  It can also be the worst adverting when they review the motel online or in person when the bed is not up to scratch.  To a potential buyer of a motel business it is also the be all and end all, even though they are easily replaced.  Human nature then makes a buyer wonder what else is not up to scratch if one of the most important items, such as the beds, are in poor condition.

The difference between a good quality bed and one ready for the scrap heap cannot be overstated, and no one can be fooled by a poor bed dressed up to look five star.  Regular replacement of bedding can not only ensure happy guests, but come sale time can indirectly help to play a big role in achieving a successful sale.

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

Enjoy the View

Everyone would love to live by the mantra, “work smarter, not harder”, but this is extremely difficult to do.  Rolling the sleeves up and getting the job done is the Australian way.

It is just so easy to think “by the time I explain it to someone, I will have the job done myself”.  The trap here is that we end up working harder, and running ourselves into the ground.  This is very easy to do in any profession, especially in the motel industry.  When living on site at the business and trying to operate that business as efficiently as possible, the result can easily be running oneself into the ground.

The most important role in operating a motel is the role of the owner/manager.  It is therefore important to avoid falling into the old trap of only working in the business and not on the business.  Working in the business takes care of the day to day jobs, but it does not grow the business.  It is the owner/manager who will take the business to a higher level by attracting new customers and growing the client base, making the operation more efficient, improving the online presence, etc, etc.  If the owner/manager is not working on these things and just the day to day jobs then it is really a caretaker’s role as opposed to being a management position.  Working on the daily items will cut wage costs but this is a very short term view.

This is all very easy to say, however putting it into practice is another matter.  Delegating certain roles to free up time to either work on the business or take some time out is extremely important.  Burn out is a common reason for selling, before one has been able to achieve what they set out to with the business.  In many cases this ends up in the sale of a motel (or any business) at a lower value than could have been achieved had the owner not been tired and therefore more eager to sell than necessary.  A typical example is when a new owner takes over, spends a large sum on capital improvements or refurbishments and sells out short of their planned time frame prior to realising the full benefits of their investment.

Effectively managing the roles within a motel are important whether it be management, reception, accounts, cleaning, meal preparation, etc.  If one is attempting to fulfil all these roles to some extent, there is going to be a point where it cannot continue due to fatigue.  If an operator can free up some of their time by allowing staff to handle certain roles, this will assist in freeing up time for the operator to work on improving the business or alternatively taking time out to recharge the batteries.  This is another important area to consider.  Taking time out can often refresh the mind and assist in working on the business also.  New ideas and improvements that can be made to the operation will often come more easily when one is relaxed and has taken some time out from the pattern of the day to day jobs.

Enjoying operating the building the business will no doubt make for a more relaxed environment for all concerned including family and employees.  An excessive work week cannot be sustained for any length of time, and this is where working smarter rather than harder by delegating some of those jobs to staff, even just for a few hours a day, will make for a much more enjoyable motel operation.  It may cost a little more in staffing extra hours, but in the long term view it may be a cost that is recouped in many ways, tangible and non-tangible.

Written by Andrew Morgan, Specialist Motel & Accommodation Broker
Photo Credit Tourism & Events Queensland