Accommodation Market Mid Year Update

Posted By Andrew Morgan

The 2024 mid year market update is a bit like Christmas in July if you are wanting to sell an accommodation business such as a motel or caravan park.

To clarify, there has been a marked increase in those contacting me enquiring on the state of the motel, caravan park and accommodation industry market in recent months. Those simply wanting to know if there are many opportunities available now, to those wanting to purchase today if possible, through to those considering whether it is a good time to sell or not.

Some sectors of the accommodation industry across various regions have seen a decline in activity, however the motel and caravan park sectors have continued to see very strong demand for acquisitions. This has been across both the freehold and leasehold tenures of ownership. Those new to the industry are trying to get a foot in the door and those already owners of these accommodation businesses, are trying eagerly to acquire more. All sizes of properties from as few as 8 units through to as many units as possible are being sought after. All price levels are seeing demand, from leaseholds as low as $150,000 for short term leases through to the largest of freeholds available.

Another question being posed is whether it is a “buyer’s market” or “seller’s market” or neither? Well, based on the fact that there are probably the fewest genuine for sale listings available on the market that I have witnessed in the last 28 years of selling accommodation businesses, it is clear to me that it really is a seller’s market at present. As we know, markets are cyclical and never stay the same for long, so for the time being and foreseeable future, this appears to be the state of play. There are a few questions one can ask themselves that will confirm what type of market we are in:-

Is there a lot of business opportunities available for investor’s to consider at present? No, anyone looking will find very few quality options available within their price range. For example, an investor looking for a leasehold motel or caravan park between $1m - $2m will find very few opportunities available to sit down and look through. Genuine sellers are not competing with many others for investor’s attention?
Are listings currently on the market seeing multiple buyer interest? Yes, there are multiple buyers making offers on motel and caravan park businesses at any one time. Sellers who are not achieving the price they want from say the first offer, have the luxury currently of waiting for another offer from the same or another buyer within a relatively short time frame. Alternatively, when it is a buyer’s market, a seller may be tempted to accept a low offer as they are unsure as to how long they may have to wait for another of to be presented.
Are there many unsatisfied buyers in the market waiting to buy? Yes, there are prospective buyers calling me weekly seeking to buy a motel or caravan park, and just checking to see if anything new was coming up off market, that they could get a first look at. This is another clear indicator of a seller’s market.
If a Contract of Sale does not complete, will there be another buyer ready to purchase? Yes, there are multiple buyers waiting on any Contract to fall over so they may jump in. The “fear of missing out” is typical of such a market, and over the years when this is the case, if one sees that someone else has contracted to purchase a business, it provides an immediate demand from others to want to purchase it also.

So very quickly, what are a few of the reasons for the market being where it presently is as a seller’s market?

Occupancy rates and trading data of accommodation businesses have been good – meaning many want in and those already in are not selling whilst taking profits now after having ridden out quiet times four years ago.
Higher room rates are being achieved as a result of the above
When business is good, getting out is not high on the agenda, when it possibly should be. That’s a call one has to make given their own circumstances.
High demand means solid prices have been and are being achieved
Shorter on-market time frames
Higher interest rates on financing have not really put a dent in demand

Many motels and caravan parks that are coming on the market for sale are not even making it to the websites. They are being sold off market, with many unsatisfied buyers not even getting an opportunity.

The state of play is simply, if a motel or caravan park becomes available on the market now, is priced correctly, and does not have any underlying issues, it will sell within a short timeframe!