Motels: You’re in charge If you’re thinking about buying a motel, the first step is to determine what will work for you — the size of the motel, the tenure, the budget, the location, the clientele, and how the business will be operated. The decision to buy any business is most likely financial, however, there are many additional reasons for wanting to buy a motel. Yes, financially, motels are a very lucrative business option, but they are also very rewarding and satisfying on a personal level, making them an excellent business choice. Everyone wants to be the boss, well, most of the time. Not answering to anyone and making one’s own decisions without being questioned applies to many businesses, including motels. Whether it is a leasehold or freehold motel, the owner is in charge. This means you, as the owner, make your own decisions and stand by them. A common misconception is that owning a leasehold motel means you must answer to the lessor. This is not the case, as the lessee is entitled to “quiet enjoyment” under the terms of the lease. Simply, this means the lessee rents the building to operate their business without intervention from the property owner. Of course, a mutually beneficial relationship between the two parties ensures both have a successful motel business and property. Motels are a great business option for those wanting flexibility, an attractive prospect for both business owners and employees. Your work hours can be tailored to suit, and having the family living onsite allows for more family time while still enabling you to operate your business.
At the starting line Where does one go to find anything these days? The internet is clearly the first port of call and the place to start for any initial enquiries into buying a motel. © 2024-2025 Resort Publishing Phone 07 5440 5322
Andrew Morgan, Motel Broker, Qld Tourism & Hospitality Brokers The search begins with sorting the wheat from the chaff. Separating good information from nonsense takes time, further investigation, and a lot of patience. If you know someone who has been there and done that, they can be a wealth of information. Checking what is for sale and contacting specialist accommodation business brokers will assist greatly in determining what motel options may or may not suit. Brokers that specialise in motels can provide details on what is currently available for sale, whether advertised online or offered via an “off-market” campaign. The only way to access “off-market” listings is to contact the broker directly. Speak to the experts, not those who “dabble a bit” and try selling everything from houses to commercial properties. Instead, consult those who specialise in the motel industry and have proven longevity, Building long-term, mutually beneficial relationships is key.
Decisions. Decisions… The options available are vast. Many people think that the town or area they want to live in is the most important consideration. If buying a house, yes, this should be high on the agenda. However, where you want to live is probably not the best place to start when buying a motel. Instead, focus on regions that offer the best motel opportunities. Buying a motel means buying a business first and foremost, so economic viability and sustainability should be paramount. Beyond this, can those areas fit in with your family’s needs and lifestyle?
Consider the preferred tenure of ownership that may suit you best. The three main types of ownership available for motel acquisitions are freehold, freehold passive investment, and leasehold. Each offers different benefits and challenges, so you must determine which suits your circumstances. Finance will likely play the biggest role here. There’s no point considering a freehold option if the budget doesn’t align with your other requirements. Weighing up the facts and comparisons will help determine what is suitable for you as an investor. Securing finance or “pre-approval” before going too far can save a lot of wasted time and effort. Guidance on what you can and cannot purchase based on your financial capacity will be invaluable. Other factors, such as serviceability, will need to be addressed on a case-by-case basis. My advice is to contact a reputable finance broker early on, specifically one specialising in the accommodation industry. Another consideration that must be made early in the decisionmaking process is whether you will operate the business yourself. This choice may affect the type of tenure you should consider. Twenty years ago, most motel owners were onsite operators. Today, many motels are operated on a more passive basis, under management or lease agreements. Motels are an excellent business in this respect, as they can be successfully run without the owner being onsite all the time. Many other business types cannot offer this flexibility.
Consider propertyspecific items Number of units: How much is enough? Determine how many units you would prefer to operate. The budget will help answer this question. Restaurant/dining: If you are a social person, then this is the side of the business you will love the most. It’s where business operators can get to know and build relationships with their customers.
TIPS FOR BUYING MOTELS
Standard/presentation: The presentation standard of a motel will affect the return on investment expected by the market. If hundreds of thousands of dollars are required to rectify poor standards or years of neglect, it will affect the price paid for the property in its current state. Motels that are not presented in the best manner can offer excellent opportunities to add value to the business/property by rectifying areas in need. Location: This plays a role in determining the value of a motel, as the demand for coastal motels has historically been higher than inland motels. Demand increases the value of the motel via a lower return on investment (ROI). Position: The main positions motels tend to focus on are major highways, main roads, waterfronts, and city centres. These areas are places where demand for accommodation is at its highest. Residence: Motels usually offer an onsite residence, not a standalone house in the suburbs. Although motel residences are comfortable and large enough, they are generally not houses. There are benefits to living onsite that include the lifestyle of a family living and working together and available taxation benefits. Many costs of living in a suburban home can be absorbed by the business in the case of a motel, such as food, electricity, council rates, rent, loan repayments, water, insurance, telephone, and much more.
Look into business matters Online reviews: Read but be careful! Not all is as it seems. Consider the general nature of the reviews and how they read, rather than individual reviews. If there are nine reviews on a motel that are positive and one that is not, go with the nine, as that tenth review may not be legitimate or from a reasonable person. If nine reviews mention a specific issue with a property or business, consider how big of a problem it is and how easily it can be rectified. Some issues can be easily fixed by a new operator and may be to the buyer’s benefit. RESORT NEWS DECEMBER 2024