TIps for Selling Motels by Multimedia AU/NZ

TIPS FOR SELLING MOTELS

Presentation is everything It all comes down to presentation. Presentation of the physical asset, presentation of the financial data, and presentation of how the motel business is offered to the market. In 24 years of selling motels I have never seen potential buyers lining the door of a dilapidated and run-down motel property, trying to outbid other buyers. I have also never seen potential buyers saying that they want to buy a motel that is a “renovator’s delight”. The motel market is not the residential market, where investors can buy a rundown house for the value of the land, on a five percent deposit and once in there, they can do a sub-standard, home-made approach at renovation and then sell it on for a significant capital gain, just like the television shows would have us believe. As we know, there is a price point for everything but for a poorly presented motel property, it will always be low. Not that dissimilar from a run-down house selling for its land value only. So, let’s start with the presentation of your financial data and documentation. Ensuring that you have all the necessary documentation/ information available in an accurate, and wellpresented format that a buyer should reasonably expect, is paramount. Prior to offering a motel to the market many items can be attended to and certain information pre-prepared. Some of these things include but are not limited to:

a. A ccountant’s profit and loss statements – three years figures if available is generally requested by a buyer. All other items aside, a motel’s value is a direct reflection of its profitability. This cannot be understated. b. Plant and equipment list – a comprehensive list of all the chattels that will be sold with the business e.g. beds, televisions, fridges, kitchen equipment, etc. Exclude any items on lease or rental agreements. Copies of lease or rental agreements – chattels under lease or road signage agreements, garbage removal, etc c. Lease document - if the business is a leasehold offering, not inclusive of the land and buildings. Include all Form 13 amendments over the years for said lease. d. O ccupancy rates – A comprehensive record per month for the last three years if available. e. M onthly income split by department – per month for the last three years if available e.g. Accommodation, restaurant, bar, etc. f. C urrent tariff schedule and the last time they were increased and by how muc.h g. Property rates notice – Copies of the last two or three received. h. A list of recent property improvements – Details of any refurbishment items or large repair and maintenance items. i.

greements - Copies of any A agreements with external parties such as chain affiliations, service providers, booking agencies, etc.

eneral information – A G breakdown of the day-to-day operation of the business such as the booking system, social media, office hours, employee details, etc.

Please be aware that it’s not about making this information available. There is a very big difference between presenting it appropriately and not. The handwritten figures on a bar coaster is an extreme example, but making sure that the information is clear and appeals to the reader is important, as opposed to handing over vague records and hoping the reader will be able to interpret the data. Secondly, and surely the most obvious, one needs to address the actual, physical presentation of the assets including the chattels, land and buildings. a. Motels with a high-quality presentation always achieves a higher sale value. To ensure that you maximise the sale price of a motel it is imperative that it presents as well as it can upon inspection by an interested buyer. Small items often make all the difference such as small repairs and maintenance issues being completed, and gardens and trees being trimmed back. Obviously, cleanliness is important in the dayto-day running of a motel, but it is also of the utmost importance for each and every inspection. Cleanliness

and tidiness go a long way Irrespective of whether the motel is five or 50 years old, a clean and tidy motel inside and out will impress. b. Buyers will discount the price that they are prepared to pay for a motel if they can see repair and maintenance issues throughout the property. A small cost upfront to fix and tidy up these items (touch up painting, mouldy or loose tile grout or silicon, worn floor coverings, etc) can make for a higher price that the buyer is prepared to pay. Small items add up to big costs from a prudent buyer’s point of view. c. Other major items that are often raised as concerns by buyers which may deter them from paying the asking price or making an offer at all, includes the absence of split system air conditioners installed, poorly painted surfaces, damaged or dated bench tops, sagging beds, and bathrooms in need of full renovation (showers, tiles, vanities). These items can be expensive and may require capital outlay, however reinvestment back into the property can pay dividends. The alternative can be a much lower price than expected. Very few buyers will accept a seller’s generosity in passing on their problems to the next owner. RESORT NEWS - JUNE 2019

TIPS FOR SELLING MOTELS

The third area of presentation to consider is how to take the motel to the market. a. T he format of the offering must present well. This is a ‘first impressions count’, all-encompassing measure of advertising and documentation that will grab a buyer’s interest and attention and make them want to look further at the motel on offer. b. The decision to advertise externally that a motel is for sale is an important one. The fact that there are more potential buyers that know the property is for sale creates a more competitive market. It gives the seller the opportunity to obtain the highest price possible through potential market bidding. Some sellers prefer not to advertise the name of the business or that it is for sale and this is ultimately an individual decision. c. Remember, “you cannot sell a secret”. The market is an ever-changing dynamic and what worked a year ago may not necessarily work now. In a quieter market a seller and their broker will need to be more proactive with their marketing initiatives to promote the property when potential buyers are not physically presenting themselves. d. T arget Market – When determining the target market for a product one needs to consider the value of the business/ property, the locality, the size (number of units in the complex), the sales income, the size of the residence and the various products offered by the motel (food and beverage, unit types, conferencing facilities, etc). Accessing the target market via the right marketing initiatives will gain this market’s attention. e. Internet – A successful marketing campaign will include a number of online marketing options. The

first place a potential buyer will look for a motel to buy is on the internet. This is a cost-effective source of marketing that remains in place long after the newspaper has been thrown in the bin, and it provides an opportunity to include information about the business but also a number of well-shot photographs of the property that can attract a potential buyer’s attention. A picture tells a thousand words. A valuable exercise for the seller is to put themselves ‘figuratively’, in the shoes of a potential buyer for their motel business (or anything for sale really) and ensure that you have addressed every aspect that you, yourself would want. This is a great place to start when preparing a business for the market. Prior to offering a motel to the market, consider the sale process from another point of view, rather than being fixed only on the result. Identify the important items that any prudent buyer will require and present these in a professional manner. The sale process is one that can take many twists and turns, and good management of the process from the start (inclusive of presentation) will be beneficial. When deciding to sell a motel one should then focus on the most important matters that will influence the buying decision of the market. There really is no benefit in spending time or money in areas that are not going to draw the interest of a potential buyer or satisfy their buying motives. Bear in mind at all times; what information will influence a buyer to take action that you, as a seller, has a level of control over? It may seem obvious, but paying attention to how your chosen broker or agent presents their information, other properties and themselves is also very important. There have been many cases over the years of professionals not providing information in a format that will assist their client. This is where the importance

of choosing motel industry specialists to represent you cannot be understated.

professional accountant, motel broker or solicitor for the sale of your motel, ask questions.

Accountant, motel broker, financier and solicitor all play a role in how they present and process the seller’s documentation. Do your research, speak to a number of industry professionals and then decide who has the most suitable credentials to get the job done best for you. Who has the relevant experience, and who will present the motel in the best possible way to ensure access to the market in order to achieve the best result for you, the client?

a. W hat motel sales have you personally handled?

Having the wrong representative for the task can unfortunately end up costing the seller hundreds of thousands of dollars as well as a lot of grief and frustration. I have personally witnessed a situation where a ‘professional’ who had said they could handle the sale for their client inevitably cost them the sale and left them thousands of dollars out of pocket. Their fee was still payable but the motel owner lost thousands of dollars, and the sale of their motel. A very costly error in not using a motel industry specialist. Remember that anyone can claim “we can sell your motel”, “we have a genuine buyer for your motel”. These are common terms that are said by agents, and while it may be true, you need to be sure that you are in a position to achieve the highest price at the least cost? Ensure that you work with specialists that are fully qualified, fully accredited (certified practicing business brokers with the REIQ), have many years direct motel accounting, motel sales and motel legal experience within the industry, and who have a proven track record of successful motel sales. They will know how to present and conduct their part of the process in the most professional manner, and will provide some guarantee that you are getting the best service possible from each specialist field. Whilst considering a

b. H ow many years have you specialised in the sale of motels? c. Do you work full time selling motels or only part time, due to other business interests/involvement? d. What are your formal qualifications? E.g. Tertiary qualification. e. A re you fully accredited with the relevant industry authority? E.g. an REIQ Certified Practising Business Broker. The ability to qualify potential buyers is a necessary but difficult and uncomfortable matter when offering a property to the market. Providing sensitive business documentation to a buyer that has not been fully qualified is a mistake. Only fully qualified buyers can complete the purchase of a motel and if a buyer does not have the funds to buy, does not have the desire to buy, or does not have the ability to buy, then there is no point providing confidential information about the business to them. The last thing anyone wants is their personal information and business’ goodwill such as major client lists, suppliers, contracts, agreements and other data being made available to competitors or those who may use the information for their own personal gain. Sellers need to carefully protect this information as ultimately it forms part of the value of the business. Your broker or agent is responsible for ensuring that potential buyers have been fully qualified and that your business data is not at risk. Ultimately, by taking a proactive and informed approach in addressing all aspects of presenting all areas of the business and property before going to market will make for a happy settlement day for all concerned. RESORT NEWS - JUNE 2019

SOLD

LEASEHOLD MOTEL, 14 UNITS, NORTH QUEENSLAND

SOLD

FREEHOLD MOTEL, 37 UNITS, NORTH QUEENSLAND

SOLD

FREEHOLD MOTEL, 23 UNITS, NORTH QUEENSLAND

SOLD

LEASEHOLD MOTEL, 16 UNITS, CENTRAL QUEENSLAND

SOLD

FREEHOLD MOTEL, 16 UNITS, CENTRAL QUEENSLAND

SOLD

FREEHOLD CARAVAN PARK, 60 SITES, NORTH QUEENSLAND NO BETTER VALUE FOR MONEY

Refurbished 35 unit motel, restaurant and commercial kitchen, beautiful inground swimming pool and covered BBQ area with lovely landscaped gardens. Family sized onsite residence with direct internal access to reception. Exposure to a very large amount of traffic each day and located close to the town centre. Very low rent payable by lessee and is being offered to the market at a high return. This business will not be available for long at this price. Stock photo for illustrative purposes. 35 Units

28 Years remaining (approx.)

Leasehold $385,000

Central Queensland

– REF ALN109

BOUTIQUE QUEENSLAND ISLAND RESORT

Very high standard boutique resort complex – live and work in paradise. 18 large self contained units plus managers residence with resort pool and tennis court set amongst tropical landscaped gardens. Current DA for an additional 13 units on the existing site and Council approval to operate as a holiday resort or retirement village and strata title. Situated 50m from beach and a short walk to the marina terminal. High return available on this high quality property. Fantastic lifestyle business. 18 Units

4,064 sqm

Freehold $2,750,000

Queensland Island – REF AFK107

Exclusive Agent: Andrew Morgan Queensland Tourism & Hospitality Brokers P

07 4953 1611 M 0417 608 041 W www.qthb.com.au

IMMACULATE LEASEHOLD MOTEL

26 unit motel complex with function room (no restaurant). Excellent location close to the town centre with exposure to a large amount of traffic daily. Large family sized 4 bedroom residence, inground swimming pool and covered bbq area with lovely landscaped gardens. Strong performing motel with increased trade year on year, low rental paid by the lessee. Offering a high return on investment – could be operated under management. Net Profit After Rent $518,000 (approx.). 26 Units

22 Years Remaining (approx.)

Leasehold $1,450,000

North Queensland

– REF ALB103

SUBSTANTIAL B&B FREEHOLD MOTEL COMPLEX

Very well presented 46 unit motel with a variety of configurations from studio to family. Excellent location close to all amenities in a large coastal town. Inground saltwater pool, bbq area, undercover parking and two bedroom managers residence. Restaurant leased to excellent operator. Solid brick construction in excellent condition. Represents great buying with much upside potential for a new operator. Strong return on investment offered. 46 Units

3,052 sqm

$3,250,000

Coastal Queensland

– REF AFM110

QUALITY LEASEHOLD MOTEL

Refurbished 17 unit motel including family configurations with 3 bedroom residence, inground swimming pool, bbq area and full undercover parking. Excellent exposure to a large amount of traffic in a regional town that has a consistently strong demand for accommodation. New 30 year lease with low rent. Much potential for the next owner to continue to build the business further. Very high 40% return on investment available. 17 Units

New 30 Year Lease

Leasehold $300,000

South Queensland – REF ALC111

Exclusive Agent: Andrew Morgan Queensland Tourism & Hospitality Brokers P

07 4953 1611 M 0417 608 041 W www.qthb.com.au