Statistics show that the accommodation industry is making twice as much money as it was 20 years ago. If you are planning on selling your accommodation business, take the time to prepare for the sale so you may leverage sector success and maximise the value of your property.
Prospective buyers will be interested in three key factors – the physical environment, financial performance and the lease – the strength of these factors will directly influence the appeal of your property.
Physical environment, consider instant appeal; is your hotel/motel immediately inviting? Guest accommodation, chattels, and grounds; assess their condition. Do they present as fresh, clean, and well maintained? Are they in good condition and of good quality? Does anything need replacing or repairing?
The owner’s accommodation is another critical area to consider; this will become the buyer’s home. They will pay close attention to its condition, and ideally, they’ll be able to imagine themselves living there happily.
A fresh coat of paint, clean buildings, and a garden makeover are affordable measures that will give your property an instant lift. Take care of outstanding maintenance and do what you can to improve the physical environment without over capitalising. Remember, while you aim to appeal to buyers, you must also ensure that you aim to maximise value at sale time.
Your property’s financial records must be in order. Documents relating to cash flow, operating costs, accounts and GST will illustrate the financial landscape of the business. Have ready access to all business documents dating back 2-3 years.
Unique to the financial portfolio of an accommodation business, is occupancy rates, revenues and room rates. This information is at the heart of how your business performs throughout the year; it highlights trends, helps to identify potential growth areas, ways to improve the existing model, or where savings can be made. With a good grasp on these points, you can accurately demonstrate the position of the business.
Perhaps the most critical aspect of an accommodation business is the lease. The terms of the agreement have a direct effect on the value of your property. Consider the time remaining, the rent review period, the maintenance fund and maintenance schedule.
The length of the lease is crucial. Relocation is not an option; therefore, the length of the lease determines the security of the business. Ensure that your landlord is willing to renegotiate terms with a new owner; this will save time during the sale process and build trust with your prospective buyer.
The rent review period states when the landlord can next increase the rent. Buyers will be looking for a review date a couple of years from the time of purchase. In the initial years, a new owner will look to keep rent and other costs consistent, giving them the best chance of success and breathing space to absorb any unforeseen expenses.
The property owns the maintenance fund, not the lessor or the lessee. A healthy maintenance fund is a good selling point, adding further value to your business, particularly if the building is in good condition. An astute buyer will view a healthy fund as an asset to the business.
The maintenance schedule is a binding agreement between landlord and lessee; it determines how often the lessee is to address any painting or repair work. Ensuring all maintenance is up to date will enhance aesthetic appeal.
In this current market, the accommodation sector is buoyant and witnessing great results. It’s a great time to sell. With proper preparation, you can achieve optimum results, capitalise on the market’s success and claim your slice of the pie.
LINK Business Brokers has one of the most extensive listings of accommodation businesses for sale in NZ. LINK brokers navigate every sale process with integrity and a commitment to mutually positive outcomes. When you work with LINK, you work with a team of highly skilled professionals.
For further information on this article, please contact Steven Mathews, LINK Business Brokers. Ph: 0800 568 001
