Opportunities in a Tight Market
- Posted By Andrew Morgan
Those genuinely looking to acquire an accommodation business or property at present know exactly how difficult it is to find good opportunities that are available. There is strong demand from the buying market to acquire motels and caravan parks, with limited supply available. Supply and demand at work!
The main reason is high demand, as there are more genuine buyers than sellers. I say genuine buyers as those are the more motivated and ready to put pen to paper, as opposed to just starting to look for example. There is a heightened level of competitive bidding in the market with more competition, that requires or motivates those genuine buyers to act sooner than they otherwise may need to.
Accommodation business owners holding rather than selling is another reason. Not wanting to sell means fewer businesses available for sale fuelling this tight market. This may be partly due to businesses experiencing solid trading occupancies and income. When things are busy, selling is generally not high on the agenda. When things are quiet, naturally our minds start to wander and think perhaps now is a good time to go. Conversely, when business is good, we can often fall into the mindset that “this will last forever”.
The high level of recent sales over the last couple of years has also played a role in the lack of opportunities available now. Demand for motels and caravan parks has been high for some time now and with many that were on the market for a short time or even those that had been available for an extended period are now no longer available.
Enough about the market, the question is how to find opportunities going forward. In such a market, you will often find that there are more businesses for sale than it appears. Many recent sales have been occurring on an off market basis. This means there are businesses and properties for sale that are listed but are not being actively marketed. They will not show up on websites as they are not being advertised for sale. The listing broker will offer them directly to existing clients and those already included within their database as prospective buyers.
Off market opportunities are available for many different reasons and are an excellent way of keeping a level of confidentiality around the business and offering. Most often those businesses listed off market will be sold well before the majority find out that they were available for sale. This type of sale process does not suit all properties, however for businesses and certain types of properties, it does provide an excellent method of sale.
Another more obvious way to source accommodation businesses and properties that are for sale is of course websites. Where we source everything nowadays, immediately at the click of a button. There are numerous different websites and types available to broaden one’s search. This is for many, the first port of call, however, cannot be relied upon alone to provide a comprehensive search.
Finally, keep in regular contact with brokers to see what they have available or what may be coming soon. Work closely with those most trusted and experienced directly in the accommodation sector. Making sure one is known to specific brokers, then working hand in hand with them to provide or source a suitable business or property will provide access to more opportunities. If the broker knows exactly what one is and is not looking for, this will assist greatly in finding the right investment.
In conclusion, here is a brief actual example of a client who was looking to buy for well over a year, without luck. They say patience is a virtue and it is very relevant in this case. A good client of mine for many years contacted be about 18 months ago wanting to discuss acquiring another freehold going concern motel. They gave me their charter as to what they were looking for and what they were trying to avoid. There was nothing obvious that suited on the market at the time, so I asked them to be patient and wait while we endeavoured to find them the right property. As time goes on it does chip away at one’s patience, however to their credit they stayed focused. A few opportunities came along but for different reasons they did not work out. Finally, we were able to source and offer them an off market opportunity that suited them perfectly. They had all their ducks in line over the time and were ready to go, making the whole process go through relatively smoothly. At the end of the day, the buyer was happy finding the right property and the seller was happy in that the business and its details were kept confidential, and the sale was concluded without fuss. Happy days for all concerned!