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Motel Opportunities Abound

Andrew Morgan - Wednesday, August 07, 2019

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