Motel Market

Motel leasing

There are many reasons why leasehold motel tenure has been such a successful business option for thousands of everyday people for the past 35 years or more.

Although around well beforehand, this business model gained much popularity and interest from those already within the industry and then newcomers who could see all the benefi ts on off er. These benefi ts have continued to be att ractive to fi rst time motel owners in addition to those experienced owners and/or operators who continue to expand their motel investment portfolios by acquiring additional motels under lease whilst overseeing the businesses under management. Change is a constant and the motel industry is no diff erent. How things are done within the industry and how markets change are just two areas that are an everchanging dynamic. Improving documentation to ensure smoother business operations or making amendments to avoid any foreseeable issues that may arise is one way. The changing of the market is largely controlled by external economic and other forces with those in the market oft en only able to react within the parameters they can. Benefi ts of a leasehold motel business that satisfy the buying motives (fi nancial, lifestyle and security) of potential investors and operators are not limited to the following:

Lifestyle

• Residence onsite: Off ers a home to live on site for the family, allowing more family time together whilst operating a business. Children can also get involved and start learning the business and how to interact with guests from a young age. • Downtime: Motels are generally busy until late morning and again from late aft ernoon. The time during the middle of the day off ers some downtime for the operator. • Building customer relationships: For those who enjoy building customer relationships motels can off er a lot of repeat clientele if the guest is looked aft er. There is a lot of satisfaction gained when a customer keeps coming back regularly because they are happy with the service being provided. • Operated under management: Motels are comfortably managed by a couple, so if an owner decides they would like to step back from the business for a while there are many good managers available who can operate a motel day to day.

Andrew Morgan,

Queensland Tourism and Hospitality Brokers

Financial

• Lower capital outlay: A motel lease does not require one to buy the land and buildings of the motel. This is the larger value component of a motel and buying the property therefore increases the capital outlay considerably and reduces the risk and return.

• Financing: The lower capital outlay means the loan required to buy will be substantially lower. This means lower levels of loan repayments and less sleepless nights for those who are not comfortable borrowing millions of dollars to buy a freehold motel. Banks are historically very comfortable lending for motel acquisitions as they are seen as solid and secure businesses.

• High returns on investment: The returns on investment for motel leases are strong and in the main range anywhere upwards of 30 percent depending on certain factors such as location, length of the lease, level of rent, economic strength of the region, standard of the property, strength of the business, etc. • Quality presentation: If a budget to buy a motel is one million dollars, the opportunity exists to buy a much higher quality motel under lease than a freehold motel at the same price level, simply because the land and buildings are not included. • Strong cash fl ow: Upon commencing operating a motel there is an income from day one depending on the level of occupancy. An operator will achieve a certain level of cash fl ow immediately as most guests pay by credit card prior to their stay. • Limited stock on hand: Motels carry very low amounts of stock. Motels with restaurants will carry more stock than those without depending on the size of the food and beverage operation. • Ready market: When the time comes to sell there is always a competitive market to acquire motel leases. A good quality motel if priced to the market, will always demand att ention. • Taxation: This is dependent on numerous factors such as how the ownership structure is setup. The benefi ts of living out of the business includes whatever costs one incurs living in their standalone home such as insurance, electricity, food, beverages, telephone/internet, rent/ loan repayments, motor vehicle costs, etc.

Leases generally commence as a 25 or 30-year term inclusive of option periods

Security

• Commercial terms: Leases are predominantly set up on mutually benefi cial commercial terms to the Lessee and Lessor and therefore work very well. When sett ing up a lease, the intention is to make it work over the long term. • Asset ownership: Includes the title to all the plant and equipment in the motel and the remaining tangible and intangible assets such as agreements in place, business name, customer contacts and goodwill. • Long term leases: Leases generally commence as a 25- or 30-year term inclusive of option periods. This is a very long lease tenure off ering the lessee long term security to operate the business. The ability to extend leases as the term of the leases diminishes is more oft en than not available to both Lessee and Lessor.

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Luckily, if you follow these 6 simple rules, you’ll have all the tools you need to choose a high-performance painting solution, without the high price tag. 1. Get a detailed, independent scope of works

This may sound obvious, but you’d be surprised how oft en it’s skipped, leaving bodies corporates with 3 diff erent prices for 3 totally diff erent scopes of works! This oft en leads to frustration for all stakeholders involved as a clearly defi ned scope must then be created further down the track and quotes resubmitt ed. How do you get a scope of works? You could engage with a project manager; however, this oft en comes with a big price tag, and the scope tends to include a lot of frills which drive the cost of the job up, whilst providing litt le value to your end result. A more cost-eff ective way is to engage with a reputable paint supplier such as Dulux or Taubmans. They will be more than happy to assess your building and provide you with a tailored paint specifi cation, which you can then pass on to your contractors. If you require a comprehensive scope for your repairs, you can simply scan the QR Code at the end of this article. It will ask you a few simple questions about what you see on your building and instantly generate you a free scope of works – without having to speak to a salesperson.

2. Compare apples with apples

As the old saying goes “the devil is in the detail.” Pay att ention to your inclusions, and perhaps more importantly, your “exclusions.” Items such as “access systems” may be included by one company, but slapped on later as heft y extra by another later on down the track when it comes time to do the job. Don’t accept line items such as “concrete spalling repairs” on your proposal, unless the contractor has provided a detailed breakdown of the exact process that they plan on using to carry out the repair. It costs a lot more to carry out a repair the right way, so don’t get caught out by companies who are simply slapping a Band-Aid on the issue, which isn’t going to last.

Rope access painters – Raffl es, Mooloolaba

3. Know who’s doing the job

It can be much more profi table for a major painting company to contract out the work to the lowest bidder, rather that completing the works “in-house.” Whilst there is usually some oversight in the form of a project manager, it’s common for the quality of the work to suff er as sub-contractors look for ways to cut corners in order to meet tight budgets. Going with a company who manage their own internal painting staff ensures more accountability over the end result and improves your chances of gett ing the paint job you paid for – not the old “1 coat wonder.”

4. Choose the right colours

If you’re looking for longevity out of your paint work, you should avoid going with colours that are too dark – especially on areas exposed to direct sunlight. Darker colours absorb more UV, causing the pigments to break down much faster which results in premature fading. Don’t want your building to look like a fashion disaster in 10 years’ time? Stick with lighter, neutral colours and avoid the urge to go with the bright, trendy schemes. Your future self will thank you!

5. Leverage rope access

Scaff olding and swinging stages can be costly and have a negative visual impact on your building. Abseiling is a great way to not only lower access costs, but also reduce the impact of the operation on your residents and guests.

Improvements in rope access methods have paved the way for even complex repairs and largescale high-rise painting projects to be carried out entirely via rope. 6. Time it right

Many common substrate issues increase in severity at an exponential rate. Whilst it might seem like a cost saving idea to prolong the paint job for another year; leaving remedial issues such as concrete spalling untreated can allow it to spread at an alarming rate. If there are budget constraints that prevent you from going ahead with a full repaint, speak to your contractor about spreading the scope out over several years, allowing you to nip urgent repairs in the bud now and paint later.

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