TIPS FOR SELLING MOTELS
Take time now! Going into anything unprepared is generally a mistake.
Not having everything in order, whether it be from a paperwork point of view or a physical asset, being prepared is going to end up resulting in an unprofessional presentation. Preparing for the sale of a motel should be happening all the time, not just when it is questioned that maybe now is the time to sell. Once the decision is made to sell, if the ongoing preparation has been done over time, it will be a simple process of putting all that prepared information together and being able to hand it over to the relevant party. There is no easy way out here, one is either organised and ready to hit the market or they are not. Providing a professional presentation of a motel business or property to a prospective party carries a lot of weight. It confirms to them that whatever they want to look at within the business to satisfy them of its accuracy will be easy, problem free and true. It confirms that the business is being operated well and a seamless transition to them as the new owner will make their life easier, as opposed to taking on someone else’s problem. Any seller wants to achieve the highest price they can, in the shortest time they can, with the least amount of hassle. This is really only achieved through solid preparation leading up to the business or property going on the market. It requires the preparation of not only the physical asset but also the business asset and what relates to it. The preparation of the buildings will include completing any renovation works or repair and maintenance issues. Keeping the lawns and gardens manicured and renewing old painted surfaces. The
the questions one knows will be asked, as opposed to trying to avoid them.
Andrew Morgan,
Motel Broker, Qld Tourism & Hospitality Brokers
preparation of the business will include a lot of different matters; however, the main area will be the financial side of the business. Those who have all their financial statements up to date and have occupancy and accommodation data available at the tap of a key, will present professionally in the eyes of potential buyers. The old saying about putting yourself in someone else’s shoes and seeing things from their point of view is very relevant here. A seller of a motel business should always put themselves in the shoes of a buyer. Prior to offering a motel to the market, preparing the information that you as a buyer would require or expect to see is easy to do. Look at the sale process from the buyer’s point of view, as opposed to being fixed on the result. Identify the important items that any prudent buyer will require and present these in a professional manner. A potential sale will often be ruined upon the initial enquiry or five minutes before the Contract of Sale is due to settle without the seller being fully prepared. The latter is a very expensive exercise for all concerned if a Contract of Sale collapses at the last hurdle simply due to poor preparation. There is no excuse not to be fully prepared for
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The entire sale process is an up and down one. Good management of the sale process from start to finish (especially preparation) will ensure a successful settlement. Upon deciding to sell a motel one can focus on the most important matters that will influence the buying decision of the market. There is no benefit in spending time or money on areas that are not going to draw the interest of a potential buyer or satisfy their buying motives (again, putting yourself in the buyer’s shoes). What is the information that will influence a buyer to take action in which a seller has a level of control over?
1. Documentation Having all the documentation/ information prepared, available in an accurate and well-presented format that a buyer acting reasonably should expect is paramount. Attend to the following prior to offering a motel to the market: •
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Accountant’s Profit & Loss Statements – the last three years will be requested. All other items aside, a motel’s value is a direct reflection of its profitability. Plant and Equipment List – a comprehensive list of all chattels sold with the business e.g. beds, televisions, fridges, kitchen equipment, etc. These are tangible assets seen as holding a high-value.
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Lease or Rental Agreements – chattels under lease, road signage agreements, etc.
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Lease Document – if the business is a leasehold tenure, not inclusive of the land and buildings.
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Occupancy Rates – per month
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Monthly Income Split up by Department – e.g. Accommodation, Restaurant, Bar, Tours, etc.
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Current Tariff Schedule – include the last time they were increased and by how much.
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Council Property Rates Notice – last two received.
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Online status – social media presence as well as online booking options.
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List of Recent Property Improvements – refurbishment and large maintenance items should always be documented and available.
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External Party Agreements – copies of any agreements with external parties such as chain affiliations, service providers, booking agencies, etc.
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General Information – on the daily operations, such as the booking system, social media, office hours, employee details, etc.
2. Physical asset presentation Fix any issues or problems with the land, buildings or plant and equipment as potential buyers do not like sellers attempting to pass on their problems. Motels with good quality presentation always achieve higher sale values as buyers realise they do not need to invest further capital immediately after buying. If a buyer believes that $100,000 will need to be spent due to neglect the offer made will be discounted by three times that. Minor items often make all the difference such as small repair and maintenance issues being completed. RESORT NEWS - JUNE 2020