Motel Opportunities are Out There
“When is the best time to buy and when is the best time to sell?” These would have to be two of the most commonly asked questions in the property industry, no matter what type of property one is involved in.
Based on the fact that there are some excellent buying opportunities on the market at present within the motel, hotel and caravan park industries, it must be said that now is an excellent time to buy. Good quality accommodation properties are trading well and a number of motels are being offered to the market by genuine sellers.
During the past two years there has not been as many motels available for sale as there had been in the few years prior. This can be put down to various reasons, demand for accommodation, trading/income levels, low interest rates, etc. There has, however, been much activity in the industry recently, with many good quality motel sales being transacted at very good prices particularly in western areas of Queensland where demand for accommodation has been outstripping supply for quite a while.
The lack of confidence within the market due to the economic instability overseas and political uncertainty have not helped the market in any way with buyers being cautious about entering new industries they are not familiar with. Those already familiar with motels know the strength of the industry and are always looking to make good quality motel acquisitions. Genuine motel buyers in the market have been active in pursuing motel businesses that offer them the main fundamentals, quality presentation, strong trading figures, good locality, and high occupancy rates based on solid room tariffs. These fundamentals for motel acquisitions do not change, no matter what the state of the economic climate.
It has been difficult to find motels that offered these fundamentals due to a lack of availability within the market. In recent months a shift by many vendors to meet the market has meant that there are increasing opportunities that are available to genuine buyers who are ready to buy. Those buyers who are not ready have and will continue to miss out on the better opportunities as they do not remain on the market for long.
Some upward pressure on capitalisation rates has meant that where motel leases were at one stage selling on high 20% rates are now selling at say 30% or low 30+% cap rates. Freehold motels previously selling at 15% cap rates are now selling on say 16% cap rates and so on.
This slight relaxation in capitalisation rates has sparked the interest of genuine motel buyers looking to accumulate good motel opportunities. An increase in motel and other accommodation business sales over the last six months has been the result. The next few months of the year within the motel industry will see increased interest from the market and more sales resulting.
The door swings both ways though and, as more buyer interest grows within the market over this period, so will the demand for the motel owner’s offering
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