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TIPS FOR SELLING MOTELS

Pricing: There is a right and a wrong

Andrew Morgan, Motel Broker, Qld Tourism & Hospitality Brokers

To save significant time, money, and stress, it is essential to set an accurate price for a motel or accommodation business from the outset, rather than pursuing unrealistic expectations. This can be achieved by gathering reliable data, seeking expert advice, and approaching the decision objectively, without emotional bias. The API states the definition of market value as follows: “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.” In essence, anything is worth what a buyer is willing to pay. One buyer may see unique value in the property and offer a premium, while another may not and propose a lower price. Ultimately, the market, comprising both buyers and sellers, determines the value through negotiation. When a willing buyer and a willing seller agree on a price, that transaction reflects the true market value on that day. This dynamic underscores the importance of realistic expectations and objective valuation in any sale.

Pricing is key to a timely sale Setting the right price when bringing a motel to market is critical to how quickly it will sell. Listing at $1.5 million when the true market value is closer

to $1 million will most likely result in prolonged buyer inactivity. While initial interest may be high, it tends to fade quickly once buyers recognise the price is unrealistic. Even genuinely interested parties may hesitate to make an offer, assuming the seller’s expectations are inflexible. Buyers compare listings and if they perceive better value or more reasonable sellers elsewhere, they will shift their focus accordingly. Overpricing not only delays the sale but can also damage the perceived value of the asset.

The link between pricing and time on market There is a clear and direct correlation between pricing and the time it takes to sell a motel. So, how long should a sale take? While there’s no definitive answer, a well-priced motel typically sells within four to six months, including marketing, negotiation, and settlement. However, if the asking price is above market expectations, the property may remain unsold for an extended period.

Understanding the market requires upto-date information Accurately assessing the current market relies on access to timely and relevant data. Buyer activity is influenced by many factors, including interest rates, the performance of the motel and broader accommodation industry, access to finance, business confidence, and the overall economic climate. Over the long term, there is a clear correlation between the health of the accommodation sector and buyer demand. When the industry is performing well, interest in acquiring motel assets increases. Conversely, when business conditions are poor, buyer interest tends to decline. This pattern reflects a natural intersection of human behaviour and economic fundamentals.

Pricing a motel: An inexact but informed process Setting the right price for a motel is not an exact science. It requires careful consideration of numerous factors to estimate what genuine, financed buyers in the current market are willing to pay. These factors include physical attributes: land size, location, position, presentation,

and critically, its financial performance. Some elements will carry more weight than others, depending on the priorities of individual buyers. This variability makes it difficult to predict exactly how value will be perceived. However, one thing is certain: if the price is misaligned with market expectations, the feedback, or lack thereof, will be immediate. In such cases, the silence from initially interested buyers can be telling.

they will be paid out before settlement.

Informed decisionmaking in motel pricing

Monthly occupancy data for the past three years, if available.

A seller can only make the best possible pricing decision by conducting research and seeking expert advice. This process should include reviewing comparable properties currently on the market, analysing recent sales of similar motels, and considering the insights of an experienced motel broker who understands how the market is likely to respond. Additionally, obtaining a registered valuation can provide an objective benchmark. Each of these elements contributes to forming the most accurate and realistic assessment of value. While no method guarantees precision, combining multiple sources of information significantly improves the likelihood of setting a price that aligns with market expectations.

Information needed to assist in setting an accurate motel price To determine a realistic and market-aligned price for a motel, sellers should gather and review the following key information:

Financial performance Accountant’s profit and loss statements: Ideally, provide three years of trading data. One year alone may not reflect typical performance and could skew valuation. Insight: Just as one good innings doesn’t define a cricket season, one strong or weak year doesn’t define a business’s value. Historical and projected trading both matter. Plant and equipment list A detailed inventory of all chattels included in the sale, such as: beds, TVs, fridges and kitchen equipment. Exclude leased or rented items unless

Lease or rental agreements Include agreements for leased chattels, signage, waste removal, and so on. Lease document (if leasehold) Provide the full lease agreement and any amendments (Form 13 amendments). Occupancy rates

Monthly income breakdown Revenue split by department (accommodation, restaurant, bar etc) for the past three years. Current tariff schedule Include the current rate card and note the last increase and percentage change. Council property rates Provide the most recent one or two rates notices. Recent property improvements List major refurbishments or significant maintenance investments. External agreements Copies of contracts with chain affiliations, booking platforms, service providers, etc. General operational information Include details on daily operations, such as booking systems, social media presence, office hours, and the structure and roles of staff.

Buyer’s perspective: A critical step in pricing Failing to consider the viewpoint of a potential buyer when preparing a motel business for sale can be a costly oversight. One of the most effective starting points in setting a price is to ask: “If I were an active buyer in today’s market, what price would I be willing to pay for this business?” Simply stating: “This is the price I want, regardless of what others think,” ignores the reality that buyers ultimately decide whether to invest and must be convinced. Understanding their mindset and expectations is essential. It’s about shifting focus from the desired outcome to the buyer’s journey and decision-making process. RESORT NEWS - JULY 2025