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TIPS FOR SELLING MOTELS

“Don’t leave it to chance” Some enjoy a “little flutter” now and then, while others prefer a “serious punt.” Whether it’s a high-stakes game of poker or flipping a coin to settle a dispute, it’s a gamble either way. In business, a gamble can mean not properly preparing for a sale before going to market. Leaving it to chance and hoping for a good outcome is too risky. Even a little planning and preparation by a seller can significantly improve the odds of a better outcome. For example, when selling a car, a thorough cleaning inside and out will fetch a higher price and sell faster than a car that has “wash me” on the rear glass and the engine winds before it finally starts. The price a prospective buyer is willing to pay for a well-prepared offering will be much higher. This preparation helps to stack the odds in the seller’s favour. Motel business sales are no different. With customers coming through the door daily and the support of a good booking system with quality reporting, preparing for a sale should, in theory, not require a major effort. The daily operations often contribute to the ongoing preparation for a future sale, even if inadvertently. Once the decision to sell is made, if this ongoing preparation has been done, it will simply be a matter of compiling all the information to present to the relevant party. Providing a professional presentation of a motel business and its physical property to a prospective buyer adds credibility and helps create a smooth process. This approach avoids constant delays that can lead to angst, more questions, and potentially distrust. It confirms that the business is being operated well and ensures a seamless transition for the new owner, making their life easier and preventing them from inheriting

from the buyer’s perspective rather than just the result. Identify the important items any prudent buyer will require and present these professionally.

Andrew Morgan, Motel Broker, Qld Tourism & Hospitality Brokers

someone else’s problems. Every seller wants to achieve the highest price, in the shortest time, with the fewest issues. This can only be achieved through thorough preparation before the business or property goes on the market. This preparation involves not only the physical asset but also the business asset and what relates to it. The preparation of the buildings includes completing any renovation works or repair and maintenance matters, keeping the lawns and gardens manicured, and renewing old painted surfaces. On the business side, preparation includes several aspects, with the main focus on financial matters. Sellers who have all their financial statements up to date and occupancy and accommodation data readily available will present professionally to potential buyers. Compliance, and everything that goes with it, is another crucial area, encompassing items such as an asbestos report, pool safety certificate, signage agreements, online contracts/ agreements, customer contracts/agreements, telecommunication agreements, food licence, and liquor licence. A good way to start preparing for the sale of a motel business is to put yourself in the buyer’s shoes. Before offering a motel to the market, gather and prepare the information that you, as a buyer, would expect to see. Look at the sale process

Often, a potential sale can be jeopardised during the initial enquiry or just before the contract of sale is due to settle if the seller is not fully prepared. This can be a very costly mistake if a contract falls through at the last minute due to poor preparation. There is no excuse not to be fully prepared for the questions one knows will be asked, as opposed to trying to avoid them and hoping they don’t eventuate. Once the decision to sell a motel is made, focus on the most important factors that will influence the buying decision. Avoid spending time or money on areas that won’t attract potential buyers or satisfy their buying motives (again, think like a buyer). Determine what information will influence a buyer to act, and make sure you have control over these aspects.

Documentation Have all the relevant documentation and information prepared, available, and in an accurate and well-presented format that a buyer acting reasonably should expect. To avoid unnecessary delays, ensure the following information is ready to go at the stroke of a key before offering a motel to the market: Accountant’s Profit & Loss Statements: the last three years will be requested. All other important information aside, a motel’s value is a direct reflection of its profitability. Monthly income split up by department for the last year, including accommodation, restaurant, bar, tours, and so on. Current tariff schedule: including the last time they were increased and by how much.

Council property rates notice: the last two received. Latest insurance policy; including policy premium. Online status: social media presence as well as online booking options. Plant and equipment list: a comprehensive list of all chattels sold with the business; including beds, televisions, fridges, kitchen equipment, and so on. These are tangible assets seen as holding a high value. Lease or rental agreements: chattels under lease, road signage agreements, and more. Lease document: if the business is a leasehold tenure, not inclusive of the land and buildings. Occupancy rates: average occupancy rate per month for the last year. A list of recent property improvements: Refurbishment and large maintenance items should always be documented and available. External party agreements: Copies of agreements with external parties such as chain affiliations, service providers, booking agencies, etc. Employee details: Basic numbers for each are enough early on. Including cleaners, reception, management, food and beverage, and so on. General information: On the daily operations, such as the booking system, social media, office hours, employee details and so on.

Buildings & chattels Cleanliness is important every day in a motel business, whether a potential buyer is inspecting the property or not. Cleanliness goes a long way in making an impression, whether a motel is young or old, a clean and tidy motel tells the story that it is being looked after. RESORT NEWS - JULY 2024