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
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
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.