Factors influencing investor interest in hotels and motels

CommercialTuesday 22 September 2015

Thinking of buying a hotel or motel? Many property investors are looking to opportunities in this sector, and it’s really no surprise. Australia is a popular tourism destination on a global scale, with its beautiful coastline, surf beaches, great weather, vast deserts, indigenous culture, national parks, mountains, ski fields, adventure parks, wineries and great cities and towns. It’s not just overseas visitors who are attracted to exploring Australia either. Australians love touring the country as well, enjoying weekend getaways, overnight stays and interstate visits.

The strong growth that Australia is experiencing in tourism provides some great opportunities for property investment in holiday accommodation such as hotels, serviced apartments and motels.

Some tourism facts and stats from Tourism Australia

  • – Short-term visits to Australia from overseas visitors grew by 8% to more than 7 million from March 2014 to March 2015
  • – New Zealand is the top source country for short-term visits to Australia at nearly 18%, with China coming second at nearly 13%. This is followed by the UK (9%), USA (8%) and Singapore (5%)
  • – The number of tourist visits from China is expected to continue growing, if recent trends are anything to go by
  • – Tourism contributes $35 billion to GDP
  • – Domestic holiday-makers contribute around 62% of all tourism at a value of $43 billion

Factors driving hotel and motel investment

As well as growth in the tourism industry, there are other factors that drive holiday accommodation investment, including:

  • – Average annual return on hotel investments (in 2011) outperformed other property sectors by as much as 80%
  • – Australia has a large and expanding aviation industry
  • – Demand for short-term accommodation is high and outweighs current supply
  • – We have a stable and solid economy with a triple-A credit rating
  • – Strong government support for tourism. The Tourism 2020 project for instance is a partnership of government and industry to increase visitor expenditure to $140 billion by 2020

In addition, the government body Tourism Research Australia (TRA) emphasises the importance of having viable projects to deliver new and improved infrastructure to tourism. TRA states that a good supply of quality tourism products will help to keep Australia competitive in the global tourism market, and will assist Australia to meet its Tourism 2020 goals.

According to TRA, accommodation projects increased by 1.1 billion in the year to 2015, adding almost 16,000 potential new rooms to the accommodation supply.

Investing in tourism property

Investing in motels or hotels for sale is a commercial venture which differs in many ways from residential investment. These include the lengths and terms of leases, GST requirements, and repairs and maintenance terms and costs.

Location and type of property is key when it comes to your initial property search, and you’ll need to understand all the terms in the purchase agreement, leases and ongoing management arrangements, which is why it’s important to seek quality professional advice from a property consultant with knowledge of this sector.