Annual Motel Market Wrap Up: 2023
- Posted By Andrew Morgan
It’s that time of the year again where we take a moment to look back on how the motel and accommodation market performed throughout the course of the year. If there is one thing we can say year on year is, how quickly the year went. I guess if there is a second thing we say, it is that markets of all kinds never stay static, they always ebb and flow.
The motel market is generally very well aligned with the motel industry itself. If occupancy and demand for accommodation is strong and motels are trading well, then the number of sale transactions is strong also. Therefore in summary of 2023, activity in the motel sector has followed suit and continued to show strength throughout the course of the year. Occupancy rates have been good to high, which has flowed on to increased room tariffs and in many cases a number of tariff increases throughout the year. As always, some regions have performed better than others in this regard, for many different reasons within the economy. The resources sector has been very active, companies have been expanding and requiring more workers and government spending in many areas and industries has meant increased demand for accommodation across the board.
Going all the way back to the end of 2022 (before 2023 commenced), we saw a very busy close to the year. The new year seemed to be a little slow to get going, with new contracts taking a bit longer to put together and eventually settle. Strong enquiry levels were still being recorded however hesitancy was lying just under the surface for many. Perhaps interest rate rises were starting to gain traction. At this stage of the year the level of motels available for sale was still quite good, even after a strong close out of 2022, however this would change as the year progressed. As mentioned, enquiry levels were strong with genuine buyers looking for good motel opportunities.
The second quarter of the year saw an improvement with increased activity from those enquiries. There was a good level of settlements completing throughout this period albeit with many transactions experiencing delays with finance approvals and various other weird and wonderful issues. Demand for Leaseholds improved during this time with many contracts enjoying “back up” buyers hoping for contracts to fail. Again, following on from 2022, where many were having issues gaining finance for strange reasons, a number of investors were then completing contracts by financing the transactions themselves. Those buyers who were financially marginal are then shut of the market by those stronger cashed up investors. The majority of businesses gaining buyer interest were freehold in tenure, although leasehold tenure was certainly seeing more demand.
Third quarter activity continued to grow with improving enquiry levels across the board. Those wanting to make the move to Queensland from the southern states to invest their money into a motel, resort or caravan park continued. In similar fashion to this time last year, activity and sales included a wide range of businesses from smaller leases through to large freehold businesses. Leases as low as $200,000 were being sought after as well as larger leases and freehold properties also. A number of businesses that had been sitting on the market for longer than others due to many different reasons, were now starting to gain interest from the market.
The final quarter of 2023 saw a continued strong level of activity. Enquiry levels were good and the businesses mentioned that had been on the market too long, were all of a sudden going under contract. The combination of strong motel business sales completed throughout the year, and businesses remaining tightly held due to strong trading performances, meant the number of available accommodation businesses decreased significantly. Those being sold were simply not being replaced within the market. This has lead to a pent up demand with those buyers who were procrastinating, now being unable to find suitable assets to purchase. Similar to the end of 2022, and 2021 for that matter, sale transactions saw more than one investor eager to purchase the same business. Again, demand was not satisfied, and those investors are continuing to look for other accommodation opportunities.
Moving on, what will 2024 have in store for the industry? Demand for accommodation businesses looks strong and the solid trading performances of businesses throughout the industry is expected to continue. The accommodation business owners already in the industry are expected to continue to invest, and demand from those within other industries, we expect to continue as they move into the accommodation sector more and more.
Queensland Tourism and Hospitality Brokers (QTHB) Partners and Staff have very much appreciated the industry’s support throughout the year and wish all a safe, prosperous and enjoyable 2024 to all within the accommodation industry.