Motel Market

The year that was

The past year has been another roller coaster ride for many industries. For some it has been a good year and for others quite the opposite.

In broad terms a lot of hurdles have been thrown at the business community during 2013 and those who operate within it, however the outlook for 2014 is substantially more positive. 2013 saw amongst other things, the early federal election call that put the entire country in go slow mode from February to September, the high Australian dollar affecting many industries including tourism, and the contraction of the mining industry that affects much of Queensland.

All this being said the motel industry has in general performed reasonably well under the circumstances, confirming the industry’s resilience. The strong trading performances achieved in the sector during the 2011/12 financial year have however been tempered somewhat during this calendar year as occupancy rates and tariff rates in many areas of the state have been under pressure. Added pressure has come in the form of the lag time in construction for new accommodation complexes that were conceived during boom times however only ended up coming on line whilst occupancy rates have been falling, thereby compounding any decline.

In respect to sale transactions a lack of confidence from new entrants to the industry had resulted in marketing periods of motels being pushed out, however there has been an active and genuine market throughout the year that has been quietly buying the right motel opportunity when it presented itself. Those buyers have been of the opinion that waiting for the result of the election was not going to let them determine when they moved forward with their motel acquisition plans.

The broader market and particularly first time entrants to the industry have been the one’s most affected. The lack of confidence to borrow money or to purchase their first motel during a time of political and economic uncertainty was too great, and they were therefore left on the sidelines temporarily, although this is now changing.

The supply of motels that have been genuinely marketed for sale during the early part of the year was reduced heavily on the back of uncertainty and this also played its part in the reduced level of market activity at the time. The smaller number of active listings during this time was a combination of vendors realising the contracted level of buyers that were active at the time and that an increase in activity was expected to present itself more towards the end of the year.

The latter part of 2013 has seen a strong bounce in activity with many now believing that there is light at the end of the tunnel. Activity across all sectors has seen an increase in the demand for motels and in the supply as well. The lure of very attractive interest rates for investors will become more of a factor as many take advantage of these low rates to make hay while the sun shines. There is a widespread belief in the industry that 2014 will see a strong rebound in the motel industry both in trading performances and the demand from both new motel operators and experienced moteliers looking to re-enter the industry. Additional acquisitions by current owners are strengthening and this is always a good sign from those in the know.

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