Latest News

Resort News Magazine - Issue October 2010

Monday, 12 July 2010 11:16

One of the most common questions asked by motel owners considering selling their motel is - What is it Woth? If the correct decision to sell or not to sell ig going to be made, then one needs to determine for themselves what they realistically believe the motel business is woth in the current market at that time.

What the business was worth 2 years ago is irrelevant. What it may be with in 2 years time is also irrelevant. What the business is worth today is what the market is interested in.

The question at hand is never easy to answer, however there are a few ways to go about it that can make alife a lot easier.

Have the latest years Profit and Loss Statements been prepared by your Accountant for sale purpose? - This will provide the basis for which the value of the business/property can be determined. Without this figure being prepared and being accurate, there is very little that can be done to form an accurate value. The key here is that the Profit and Loss Statement is prepared "for sale purposes", so that the motel business can be readily compared with the market sales evidence in order to get the most accurate information to get the most accurate result. In other words comparing applies with apples.

What have other similar motels in the region sold for? - Find out what other motels in the region have sold for. This is not easy to find out as there is not a program or database that contains this information, unlike residential or commerical property which can be readily accessed at the click of a button. In order to find out this information one must speak to reliable people within the motel indsutry in order to get accurate informaiton rather than rely on rumours of what the sale price may have been, which is often inaccurate.

How does this motel compare to the motels. that have been sold? - Comparing the quality of the properties needs to be considered. Are they of a comparable size, standardm unit type, location, etc. If the motel is leashold then the lease terms will also need to be compared. Eg tenure, rental, terms, etc.

What capitlisation rate will be appropriate to this motel? - After having considered point 3 above, it can be determined what cap rate the market is going to expect from such a motel. If the motels is exactly the same as the one which has sold, then that makes this question much easier to answer. In realiy this is never the ase, Therfore one must consider the differences between the sales evidence adn the subject business/poperty, and determine the appropriate adjustment to the cap rate that the market will make. This is not the easiest part of this process, as the market's perception to the differences needs to be calculated. A basic example is, if two motels are exactly the same except one is deemed by the market to be in a slightly less desirable location, how much will the market adjust the cap rate taking this into consideration?

 Make sure the information you gather is reliable - Contact professional's who are specialists in their field as they are the people who know their industry and are the best to advise on and achieve the best for their clients. The motel industry is no different. Specialist Accountant's, Solicitors, Bankers, Valuers and Motel Brokers are in the best position to advise on matters within the motel industry. If one is selling a house, go to those who specialise in residential sales. If one is selling a business, go to those who have the experience and knowledge within that field. Making the correct decision can save a business owner not only financially but also emotionally, as the sale of a business can be an emotional and expensive rollercoaster ride if not handled correctly.

Andrew Morgan

Director/Motel Broker

Qld Tourism & Hospitality Brokers