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Financial Presentation

Written by Andrew Morgan, Specialist Motel & Accommodation Broker

We talk a lot about making sure a motel’s presentation is up to standard before taking a business or property to the market for sale.  The first thing we think of when talking about presentation is the physical aspect and look of the property.  But what about the financial presentation of the business?

Supporting financial data to confirm what the Seller is saying about the business and how it performs is just as important as the physical standard of the property.  An issue with either will turn a buyer’s focus away from wanting to pursue the business and onto others that are looking more attractive.  How financial data presents can be covered a couple of different ways.

1. So how do the numbers actually present?  Not how high the income or profits are , but how they are presented on hard or soft copy.  Do the totals add up?  Don’t laugh, I have seen many addition errors over the years.  The total expense amount is less than what the individual expenses total.  Are the Seller’s Accountant’s supporting documents also attached to the profit and loss statements?  Is the spelling of each entry correct?  Again, don’t laugh, this is common.  I have the same issue with spelling mistakes on a profit and loss statement as I do with an email.  If I see an email come in and there are spelling mistakes in the subject line on text, I immediately think the email is spam and discredit it.  The same goes for financial statements.  I start to wonder who prepared this profit and loss statement, surely it was not the Seller’s Accountant.  Again, I start to question the validity of the statements.

2. Next comes the all important amounts.  The Income & Net Profit must be as high as they can to achieve the full sale value in the market.  Therefore I suggest every Seller has their Accountant prepare an Abridged Profit and Loss Statement.  This will present the profit of the business as it should for sale purposes.  It will have removed all Income and Expense items that are particular to the current owner and not the business.  As an example an owner choosing to pay themselves a wage of $50,000 per annum as compared to $5,000 per annum, has nothing to do with the business, this is generally a taxation based decision.  Profit and Loss Statements are generally prepared for Taxation Return purposes and to that end include expenses and tax deductions which inevitably present the lowest profit possible, or even a loss depending on each parties individual tax position.  Adjustments will then be completed so the Abridged Profit and Loss Statement can be used for sale, refinancing or other purposes.  If not, a true representation of the profitability of the motel business compared to other motel businesses would not be possible.  Conversely it is also important to make sure that no legitimate operational income and expenses of the business have been removed.  Even the most basic due diligence of the financial statements will determine this.  The best result from this is that the end sale price of the business will be affected negatively if the profit has been overstated.  The worst is that the transaction will be terminated altogether.

Aside from the Profit and Loss Statements being required by a potential buyer, other financial data such as monthly income and occupancy figures will be required for cash flow purposes.  Council rate notices, electricity, laundry, rent (in the case of leases) and Insurance Invoices and Receipts (to name a few) will be required.  These must all match what has been included in the Profit and Loss Statements.  Providing monthly Income Statistic reports that include GST, will not match the Profit and Loss Statement.  As long as the consistency of the difference of the GST is there, the issue can be cleared up quickly however if this is not the case, the interested buyer starts to question the accuracy and legitimacy of the data.  If there are anomalies for a particular reason, be upfront and explain why this is the case.  Never try to sweep it under the carpet and hope that the issue goes away.  That never happens!  Make sure all the data you as a Seller are providing matches up.

Buyers who are interested in buying a business want the financial data presented to them to be accurate.  When their interested is sparked in a business it is based on the information that has been provided.  If any anomalies arise they are probably more disappointed than anyone.  Nine times out of ten the financial data presented will be accurate.  There may be small differentials here or there but in the main these will not have a material affect on the profitability or value of the business and are easily explained or remedied.

No one buys the smallest of products if they are unsure of its validity and correctness, let alone a business and property.  The credibility of the financial data being presented and the person presenting that data is paramount.  Lose that credibility and lose the sale.

New QTHB Brisbane Office Opened September 2015!

Finally!!!!!  It has been a long time coming but we are happy to announce the opening of our Brisbane office in addition to our head office in Mackay.  This will be of great benefit to our existing and new clients in the future.  The Partners have been eager to open an office in Brisbane and the right timing and opportunity has now made this possible.  The opening of the Brisbane office will allow QTHB to better service all our clients needs and is a strategic move for the firm to offer new and higher levels of service to the accommodation industry.

Market Update 2015 - Caravan Parks, MHP'S and Accommodation Villages

With the commencement of the 2015 tourist season fast approaching many operators are optimistic of a solid season. With the AUD at its lowest level in approximately 5 years and fuel prices having fallen considerably (and both likely to remain at current levels for some time) there are encouraging signs for the Australian domestic and overseas tourist market, particularly the drive holiday market. Far northern and western regions of Queensland in particular will hopefully experience a strong season as a result of lower fuel prices. Weather in the southern states compared to that in Queensland will also play a huge role in the commencement and duration of this year’s tourist season.

Caravan Parks with a permanent resident focus in SEQ should continue to see good occupancies, whilst many in regional centres will be reliant on their core base of residents as economic conditions in each region will be reflective of their ability to improve occupancy.  The performance of Seasonal Worker Parks will again be heavily dependent on growing conditions within each region. In general terms 2014 was consistent for this sector without any region having a standout year.

Manufactured Home Parks (MHP’s), particularly in SEQ, should continue to experience high levels of demand whilst residential prices remain strong in the southeast and the southern states as they offer an affordable housing option for a number of demographics.

Workforce Accommodation Villages – with a contraction in the coal mining sector demand for accommodation continues to be subdued, however some areas are still seeing capital works programs or new developments take place. The one sector that had predominately escaped the contraction in 2014 was LNG related areas, however with the price of gas tied to oil it will an interesting year for future developments and capital expenditure by mining companies in this space.

The Tourist Park market continues to gain traction with a number of Parks having recently sold or presently under contract. We expect given favourable conditions for the industry (lower fuel & AUD) and the potential for lower interest rates to spur buyer confidence when other market segments may be more reliant on economic conditions.

The Manufactured Home Park market has also experienced a high level of sales activity in 2014 and this is expected to continue, not just in SEQ but also in select regional centres.

In general terms we expect buyer demand for all sectors to show continued improvement in 2015. There’s limited quality product available for sale in the market across all sectors, as such it may represent an opportune time for some operators whilst conditions are favourable and/or improving.

Caravan Parks, MHE and Accomm Villages Market Update July 2014

Caravan Parks, MPH and Accommodation Villages

The commencement of this year’s tourist season was again heavily dependent on the quality of the weather in the southern states compared to that in Queensland. A number of regions experienced a delayed start to the season with the  cool change in the southern states taking a little longer to get caravanners to progressively make their way north. We are optimistic that the remainder of the season will be strong and extend into the traditional shoulder months of October/November.

Caravan Parks with a permanent resident focus have generally performed well, however some regional centres have seen a decrease in demand. Seasonal workers Parks although not experiencing a record year are in the main trading consistently. Mining related Parks and Workforce Accommodation Villages are experiencing differing levels of demand dependant on activity within each region.

Manufactured Home Parks continue to perform strongly, particularly in the south east where an improving residential market is having a natural flow on.

In general terms the market for Caravan Parks understandably reflects economic sentiment and tracks closely that of other property markets. In this respect the Caravan Park Market is also within itself diverse depending on a range of factors, such as location and market focus (Tourist, Permanent, Manufactured Homes and Workforce Accommodation).

Some market segments have gained considerable traction in the past year which is supported by a number of Parks having either recently sold or now under contract. A number of others Parks presently for sale are also experiencing high levels of enquiry.

At the moment there is a high level of buyer interest for Tourist Parks and Manufactured Home Parks. Tourist Parks with existing or future expansion potential to include a Manufactured Home Park component are of particular attraction to buyers/investors. Interest in mining related Parks and/or Workforce Accommodation Villages is heavily dependent on the prospects within a particular region with a clear distinction now apparent between the buyer appetite for Bowen Basin and Surat Basin property – as we’ve seen however things can change quickly in this space.

Interest rates and an easing in the banks squeeze on lending have most definitely assisted in enabling buyer confidence. However, at some point in the future the potential for interest rate increases will be of concern to buyers. As yields for Parks have remained relatively strong in comparison to other market sectors, any increase in interest rates will have a diminishing effect on a buyers yield gap. Expectations are that interest rates will hold for the remainder of the year with many economists not predicting increases until 2015.

If you’ve considered selling in the last year or envisage selling in the next 12 months then it’s an opportune time to get the process underway. There’s limited product available in the market at present and yet as discussed more buyers are starting to flow back into the market as interest rates and yield gaps engender buyer confidence. 

For any owners wishing to discuss the market at present or for an obligation free appraisal on the value of your park, please do not hesitate to call one of our experienced brokers


m  0438 730 166   e

This market update is general in nature and does not take into account individual circumstances.  Please contact us  to discuss  specific market sectors.