To Defend Price, You Need to Understand It

22 May 2024
Words Trudy Crooks Informer

To Defend Price, You Need to Understand It

In this market, you need a broker who understands price — and will defend yours.

In this column, I always like to give you our take on where the market is sitting.

ResortBrokers doesn’t set the market — supply and demand does, as ever — but we understand it as professionals who are active in this space on a day-to-day basis meeting buyers and sellers on the ground. We like to keep you abreast of where the market is at, so you can best position yourselves for sale or your next purchase.

So, what’s the market doing?

We’re seeing huge demand for new hotels, motels and caravan parks across the country. As our wise founder Ian Crooks (aka dad) says, hatches, matches and dispatches will always drive the accommodation market.

Add to births, weddings and funerals the following: a population explosion, domestic migration, an itinerant workforce, international tourism and Australians’ great love for holidays!

The macro-economic outlook for our industry remains positive out to the horizon. The enormous demand we’re seeing for new accommodation businesses comes as no surprise given our insatiable need for them. In the last decade alone, the number of hotels alone has risen a staggering 40% across Australia.

But there’s also significant barriers to entry these days: spiralling construction costs, ongoing supply chain challenges, rising borrowing expenses, as well as motels being converted to social housing by government in response to our ongoing housing crisis.

What’s more, building companies are spoiled for work. There’s so much infrastructure either under construction or in the pipeline that Class 3 buildings like hotels are finding it harder to get out of the ground.

That puts existing stock at a premium.

We’re seeing a lot of that stock come onto the market now. ResortBrokers has traditionally sold around 200 accommodation properties and businesses a year. In the privately owned, small business space, we were accustomed to properties turning over every five to seven years.

Obviously, Covid was the almightiest of spanners thrown in the works. Because of that, we’re now seeing the release of built-up compression of owners and operators who were ready to sell prior to Covid, had no choice but to hold through Covid, then came out the other side into one of the most profitable trading periods we’ve ever seen historically for accommodation businesses.

While these businesses have much more room to grow, these sellers are understandably ready to move on.

With more supply coming onto the market, vendors need to meet the market on its terms. Don’t get me wrong, there’s no shortage of highly qualified buyers. But no one is paying overs. Accommodation businesses that are priced fairly will sell, in many cases very quickly. We have sold and settled some deals inside four days (yes, you read that right).

Accommodation businesses that are overpriced are getting little, if any, attention. Some vendors are expecting to achieve the same yields as when interest rates were 3% lower. That’s just not going to happen in this market.

Unfortunately, we’re having to turn down vendors with unrealistic price expectations.

We pride ourselves on being honest with our clients in delivering a service. In this market, we’re levelling with vendors by saying we don’t think they should lose three months or more holding out for an unrealistic sale price that simply won’t be achieved.

That said, if we take your sale on, we’ll defend your price to the hilt.

In many cases we’ll exceed your price expectations because we know how to create competition for quality assets and businesses.

ResortBrokers’ inhouse research department spends a lot of time analysing the accommodation market’s performance across the country.

We also analyse our own performance.

Having analysed over 500 sales across the last three years, we found that compared to our competitors, ResortBrokers is:

  • 2.4 times more likely to acheive a result at list price
  • 4.6 times more likely to achieve a result above list price

There’s nothing that pleases us more than pleasing our clients. Your success is our success, as we say. We’re in a market with many moving parts. It’s more important than ever to engage a broker who understands market prices, will defend yours and even exceed it. END

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