Annual Motel Market Wrap Up 2022
- Posted By Andrew Morgan
Well how quickly 2022 has come and gone! As always at times everything was hustle and bustle and at other times it was quiet and everything in between!
Each year we do a short but direct examination of how the motel and accommodation industry in general performed throughout the past 12 months from a sales market point of view. We ask the question, “how did our predictions play out and did we get it right, or completely wrong this year?”.
Overall in summary, we would have to say that activity in the motel sector has been strong and growing over the course of the year. Occupancy rates have been high which (to our excitement) has flowed on to increased room tariffs and in many cases a number of tariff increases throughout the year. The increasing of room rates has littered our articles, discussions and reports for decades and to be witnessing regular increases within the industry puts a smile on our faces. As always, some regions have performed better than others in this regard for differing reasons within the economy.
Now let’s breakdown the year. With the end of 2021 finishing quite strongly, once the new year rolled over things picked up where they left off. Strong enquiries from genuine funded buyers saw a number of early freehold going concern sales completed, however overall the first quarter of the year was just a warm up for what was to come. Enquiry levels were solid with genuine buyers looking for opportunities. A number of motels, resorts and caravan parks were marked “Under Contract”. Strangely, a few of these contracts did not reach settlement for reasons generally to do with the buyer’s side of things. Inspection numbers were increasing and those contracts that did not proceed were reinstated with alternative buyers who had not reacted quickly enough when originally considering the propositions. The majority of businesses gaining buyer interest were freehold in tenure, with limited numbers of leasehold sales completed. Enquiry volumes were substantially higher for freehold going concerns. A trend that had followed on from 2021.
Moving on from the first quarter of 2022 there was much increased activity throughout the second quarter of the year. There was a strong number of settlements completed across the board including freehold going concerns and some leasehold tenures. Inspection numbers continued to be solid and there had also been increased enquiries for leasehold motels. Where many were having issues gaining finance with non-commercial lending requirements as their impediment, a number of investors were completing contracts by financing the transactions themselves.
Third quarter activity continued to grow but did not result in as many settlements being concluded as the previous hectic quarter. Contrary to the previous year with border closures still an issue at that time, this year, those wanting to move to Queensland from the southern states to invest their money into a motel, resort or caravan park were pushing ahead. A wide range of smaller through to large sized accommodation businesses were being sought after and although the volume of sales was not as high, there were quite a few larger property transactions completed. This was a very positive result for the industry and market, and gave confidence to those procrastinating that were looking like the kid outside the lolly shop.
The final quarter of 2022 saw a slowing of enquiries which could be attributed to the lower level of businesses available on the market. With the strong sales concluded throughout the year and many businesses remaining tightly held due to strong trading performances, this does lead to lower enquiry levels. Having said that, a number of larger sales were concluded and the end of the year has finished off strongly. Similar to the end of 2021 last year, a number of these sale transactions saw more than one investor vying for the same business. This results in unsatisfied demand, of which those investors are continuing to look for other accommodation opportunities.\
Well that was the past, so what comes next? What will be the state of play in 2023? We think things look pretty positive in the industry for the year ahead. With demand for accommodation businesses looking solid and trading data throughout the industry growing, all points to good things happening. Those already involved in the industry are expected to continue to add to the stable and new entrants and first time owners and operators are eager to get involved on the back of those they know or see whom are already in the accommodation industry and are enjoying all the benefits it has to offer.
All of us at Queensland Tourism and Hospitality Brokers (QTHB) wish you a happy, safe and prosperous 2023 throughout the accommodation industry.