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Twelve Reasons to Buy

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

There are many reasons why a large majority of people buying motels today have been in the accommodation industry before.  Many of the benefits of owning a motel are what keep people coming back to the industry.  Within the motel industry today there are more and more people who already own a motel that are acquiring additional motels to add to their portfolio.  This has been the case for some time.

Every different business or industry has it benefits, however when comparing one to another consider some of the benefits a motel offers.

  1. High Return on Investment – The returns on investment for motels are strong, depending on certain factors such as location, economic strength of the region, standard of the property, strength of the business, profitability, clientele, etc
  2. Current Market Activity – most recent activity within the market has proved some great buying opportunities.  Savvy investors are beginning to take advantage and are picking up some quality properties as economic activity starts to improve.
  3. Report to No One – You are your own boss and the one in control of the business’ future.  There is no one to report to or answer questions of.  The buck stops with the business owner, who makes the decision on what directions the business takes.
  4. Low Capital Outlay – When compared to other property options motels offer substantial value for money.  Consider they produce a high return on that investment, they also include a home/residence and the land generally sits on a prominent site with a large traffic volume past the front door.  The downside risk of the investment is generally low as it is underpinned by a strong land and buildings component.
  5. Financing – Banks are historically very comfortable lending for motel acquisitions as they are solid and secure businesses.  A low 35% deposit is required with the balance able to be financed, which leads on to the next reason.
  6. Taxation Benefits – This is dependent on numerous factors such as how the ownership structure is setup.  The tax benefits of living out of the business includes a large amount the cost one incurs living in their stand-alone home such as insurance, electricity, food, beverages, phone costs, rent/loan repayments, motor vehicle costs, etc.
  7. Strong Cash Flow – Upon commencing operating a motel there is an income from day one depending on the level of occupancy.  An operator will achieve a certain level of cash flow immediately as most guests pay by credit card.  The amount of cash taken by motels had diminished, however for whatever reason I have noted in more recent years motel owners advising they have been taking increased amounts of cash over the counter.
  8. Limited Stock on Hand – Motels carry very low amounts of stock.  Motels with restaurants will carry more stock than those without but generally no more than $15,000, depending on the size of the food and beverage operation.
  9. Ready Market – When the time comes to sell there is always a competitive market eager to acquire good quality motel businesses and properties.  The market may have its highs and lows but over the last 22 years selling motels, this has always been the case.  Not a bad record of accomplishment for the industry.
  10. Easily Operated Under Management – Motels are comfortably managed by a couple or often one person, so if an owner/operator decides they would like to step back from the business for a while there are many good managers available who can manage a motel’s day to day operations.
  11. Onsite Residence – Offers a home to live on site for a family allowing more family time together whilst operating a business.  Children can also get involved in some ways and start learning from a young age.
  12. Building Customer Relationships – For those who enjoy building customer relationships, motels can offer a lot of repeat clientele if the guest is looked after.  There can be a lot of satisfaction gained when a customer keeps coming back regularly because they are happy with the service being provided.  It is confirmation a good job is being done.

Discovery Parks Acquire Airlie Cove Resort and Van Park

Adelaide based Discovery Parks now has a presence in the Whitsundays, adding Airlie Cove Resort and Van Park to their portfolio. Set on 28 tranquil acres close to the bustling tourist destination of Airlie Beach and adjoining the spectacular Conway National Park the property has a diverse range of accommodation options including Bali Villas, 1 & 2 Bedroom Villas, Holiday Cabins, Ensuite Cabins, Studio Cabins, Caravan Sites, and 2 Camping Areas.

The Park is well serviced by modern facilities including three large Polynesian style camp kitchens, bbq gazebo, 2 amenities blocks and laundry. The Resort is a destination within itself, with plenty to keep guests of all ages occupied including resort style pool with water slide, water park featuring a big tip bucket, three slides, walk through spray tunnel and ground sprayers, pirate ship playground, jumping pillow, TV & internet room, go karts and mountain biking tracks. 

“The idyllic location, quality cabins and range of facilities the Resort offered made this property highly sort after by investors.” said negotiating broker Ryan Doughty of Queensland Tourism & Hospitality Brokers.

Discovery’s chief executive, Grant Wilckens, said the Airlie Cove acquisition was a strategic investment in the globally recognised Whitsundays region where strong demand for accommodation is forecast beyond 2020.

“The Airlie Cove Resort and Caravan Park is a beautiful family holiday destination with the largest resort pool in Airlie Beach, water slides, mini golf and an outdoor cinema” he said. “It compliments our resorts in Coolwaters Yeppoon, Fraser Coast and Byron Bay – providing high quality accommodation options for customers travelling the coastal route.”

It is the first deal since Discovery Parks’ acquisition of the Top Parks Brand, which created a network of more that 220 parks.

Source: Discovery Parks, The Australian Financial Review

Anecdote: Keeping Everyone Happy

Written by Andrew Morgan, Specialist Motel and Accommodation Broker

Recently an old friend and I arranged to catch up.  He told me that he and others within his business travel around the countryside every week or two and stay at generally the same motels whilst away.  I was eager to hear his feedback on the motels he stayed at and if he enjoyed his stays or not.

The line of work he is in requires early starts in the morning therefore a good night sleep is his main requirement (as it is for most).  Many different services offered by the various motels he stayed at did not hold much interest for him other than a good comfortable bed, pillow, a carpark close to his unit and peace and quiet.  His feedback was that in the main, most motels he stays at provided this, which was great to hear from my perspective.  Unfortunately one did not.  He had no issue with the bed, pillow and carpark, however the peace and quiet he needed for a good night sleep was not on offer.

In his words, “I am happy to have access to all the services the motels offer such as WiFi, Austar, etc, but to not have a good night sleep due to noise, those other things count for nothing”.  In his case he said that other guests travelling together staying in the motel all congregated outside the unit next to his and had a bit of a get together.  Not a big party, but just a small gathering over a few beers.  He said in real terms the group were probably only four metres from his bed with an exterior wall, door and window in between, and that they were not yelling out, but just the mix of loud talking and laughter would not allow for any sleep.  Obviously he had the choices to speak to the group, speak to the manager or do nothing.  He chose to do nothing as he did not want to cause a scene or upset anyone.

The end result unfortunately in such a circumstance is that the guest leaves the motel unhappy and in this case he has vowed never to return to that particular motel.  To his credit, he did not post a bad review on any web sites which as he said “would have been unfair to the manager since I did not do anything about it”.  Not having been there or knowing the exact circumstances at the time it is hard to say whether he should have acted upon the situation or not, and if not then he has no one else to blame.  The other is that he should not have had to act upon it, that as a paying guest of the property he should have had the right to a good night sleep provided to him.  He felt that the manager on site should not have allowed a group of guests to gather directly outside a unit and stay there, whilst other guests should have been allowed a good night’s sleep.  He believed that it should have been management who realised what was happening and that they should have moved the group to an area of the property (which was available) where they would not disturb anyone.

A difficult position is created for the manager or motel owner who has not received a complaint and therefore how can they keep that guest happy if they have not been made aware of the guest’s issue.  Ultimately, who’s right or who’s wrong does not matter from the motel owner’s point of view other than the fact they have lost a future return guest.  Also, that he is telling others that he did not have a good experience at the XYZ Motel in that town.  Anyone who hears the story will then most likely avoid the motel as well and stay elsewhere, thereby damaging the goodwill of the business going forward.  The economic side of things hit home when he said his business spends approximately at least $15,000 on accommodation each year.  No business can really afford to lose this to a competitor.

I guess all one can do is make sure they provide guests with as quiet a motel facility as possible and allow and direct other guests (so as not to upset them) to congregate elsewhere on the property, such as by the pool or wherever the other guests will still be allowed a good night’s sleep.  As always, a difficult balancing act for moteliers in any case, trying to keep everyone happy.