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.
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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