Annual Motel Market Wrap Up: 2024
- Posted By Andrew Morgan
I feel like I say it every year at about this time and that is, how quickly the year went! The second half of 2024 seemed to just disappear before I knew it. Time flies when your having fun!
What a busy year it has been. Motels have been, as they say, “the flavour of the month”. Having said that, caravan parks have also had their fair share of admirers. In summary, good quality businesses have been in very high demand and selling fast. Those that have had an issue or two have been slower to move, which is always the case no matter how strong the market is. Those looking to buy have been from all walks of life. Starting from small leases to “buy oneself a job” and be their own boss, through to large corporate entities seeking additional regions and market share.
The motel market has continued its usual trend, which is to align itself with the state of the motel industry in general. High occupancies and demand for accommodation has seen a strong number of sale transactions accordingly. The only real limitation has been the lack of supply, which again aligns with the industry and comes with the territory of strong trading performances being realised. When business is good, selling is not often high on the agenda. Although as I continue to preach year in year out, this is often the best time to sell.
2024 saw certain regions outperforming others for different reasons. The resources sector has continued to be very active. Companies have continued to grow and therefore the requirement for more workers has driven demand and room rates. Government spending continued to help drive demand in many areas and industries. This has again seen increased demand for accommodation across the board. Many regional towns have benefited greatly from this activity.
Strong enquiry levels kicked off the new year with investors eager to find new opportunities. At this stage of the year the level of motels available for sale was reasonable without being good. The balance of potential buyers and opportunities available within the market was changing. As sales were occurring the replacement of those listings was not occurring. Motels and caravan parks were clearly being more tightly held.
The second quarter of the year continued to see strong demand from investors. Listings were continuing to dimmish as sales resulted and they were not being replaced by genuine sellers listing their businesses for sale. Again, we have continued to see most transactions that involve a finance condition experiencing unnecessary delays. Cash is king as they say and those investors not requiring finance to complete transactions are well and truly ahead of the pack in being able to secure and settle a transaction. A situation which occurs in strong markets is that of there being “back up buyers” available for a business should the current buyer not be able to complete the contract. This has been a continuing situation and is a result of that imbalance between the volume of willing buyers and limited sellers.
Demand for leaseholds continued to improve and this had reached a point during the middle of the year when demand for leases was rapidly catching up to freehold demand. Freehold tenure had seen the lion share of enquiry since late in 2019. With passive investments being as scarce as hen’s teeth, freehold going concern opportunities were being taken up by those unsatisfied passive investors who were simply changing their scope, to be able to create their own passive investment, either by selling the lease or installing management.
Third quarter activity continued along the same path as earlier in the year. The increase in motel, park and resort investors moving to or simply investing in Queensland from the southern states continued. Any business in this sector that had been sitting on the market for an extended time frame, had not sold for a reason. Whatever the reason, there has been something about them that has not interested a strong and active market. Rectifying any issues the market identified has worked for some of those businesses who have gone on to sell.
The final quarter of 2024 saw a continuation with the result being a pent-up demand as many buyers have been unable to find suitable assets to purchase. Again, demand is not being satisfied, and investors are continuing to look for other accommodation opportunities.
So on to 2025. How will a dynamic market play out during the year? Will a continuation of the last three years be the case, or a change perhaps? At this stage you would have to say strong demand and the trading performances of accommodation businesses throughout the industry looks set to continue. Existing accommodation business owners will seek more opportunities and those wanting to break into the sector will keep knocking on the door.
Queensland Tourism and Hospitality Brokers (QTHB) have continued to appreciate the accommodation industry’s support throughout the year and to all within the accommodation industry we wish you a healthy and prosperous 2025.