Market Report 2007

The Hotel Marketplace: (Nick Tinning April 2007)

The hotel marketplace can be divided into a number of different groups each with their own market characteristics:

Smaller country hotels with NO poker machines:

The market continues to be tough on hotels without gaming. The drop in Liquor license demand and value has removed one of the underpinning value assets of these hotels.

Business profit returns to the purchaser have become important. One of the greatest disincentives for a successful sale is the advisor who points out that the purchasers are leaving well paying employment to work 7 days in a hotel for "how much" … The majority of purchasers are chasing a dream "to own their own pub".

Correctly priced hotels will sell.

Country Hotels with poker machines:

2006 saw a large turnover in country hotels with poker machines. Here the asset value of the poker machine entitlement underpinned the price.

2007 has seen a slowing in demand for country hotel. The fear of no smoking, limited returns and return of sensible bank lending ratios has cooled the market.

Emphasis has returned to business profit returns. - Purchasers are becoming wary of hotels selling with x number of machines when the figures presented had a greater number of poker machines.

Lending institutions are demanding purchasers receive genuine business profit returns.

Large Provincial City Hotels:

Demand continues to drive record prices. Particularly for those properties that can be described as suburban with large land holdings.

Returns appear to have reached their limit. Both corporate and individual purchasers are examining the profit closely. Properties demonstrating strong profits are being sold - based on return - there is no payment for potential.

Coastal Hotels:

As always there is a strong demand for coastal properties. Prices are bigger than identical hotels on the Western side of the range.

There is still a relationship between price and business profit and it is important that the vendor gets this right.

The return to business profits as the major determinant of price will result in the correct pricing of a hotel to achieve a sale. Should a property remain on the market for an extended period of time it risks becoming stale and creates a perception in the potential buyers mind that "something is wrong".

Please feel free to contact Chris Tinning & Company for a free market appraisal of your hotel.