Motel Business Valuation

Motels have traditionally been attractive business purchase choices for many SME buyers for many years. Ex-farmers have been recognised as a buying force in the motel sector. This may be because farmers have traditionally received a low return on their investment for their farm profits. That is, the value of the farm is very high compared to the profit it makes. Therefore the twelve to twenty percent return on investment a buyer receives for his motel profit seems reasonable to that sort of buyer.

For example, a freehold Motel making a profit of three hundred thousand dollars may sell for two million dollars, which is a fifteen percent return on funds invested.

This is an example of a quality motel in a good area. If the motel is in a marginal area such as a wheatbelt town and has poor or falling occupancy levels, then obviously the ROI will be higher.

On the other hand, if the motel is in an excellent position in a popular seaside tourist town and has high occupancy levels and the opportunity to increase its room rates over time, then it will tend to sell for a lower return on funds invested percentage (higher price).

The underlying land value is also a consideration, because over time the land upon which the business operates may become more valuable for another use, such as conversion to offices, retail, or apartment residential or as a mixed-use development.

Therefore a buyer of a motel in a growing area with population pressures may, with patience, end up with a terrific capital gain when he or she sells out to a developer after waiting patiently for ten or fifteen years for property values to make the highest and best use for the property to be use other than a Motel.

Read other articles

Rent Roll Valuations

Rent roll valuations are one of the most common valuations done by Business Valuer Network members. We value many real estate practices each year and have a broad database of

Real Estate Agency Business Valuation

Real estate agents often sell their business or sell the rent roll which forms part of their real estate agency business. They sell their rent roll because they take the

Trades Business Valuation

Trades businesses are commonly bought and sold in Australia, but with some difficulty and at low price-earnings multiples. Why? Well, there are some barriers to entry to ownership of a

Medical Business Valuation

Medical businesses are a specific niche area of business valuation and there are very few business valuers in Australia who specialise in medical. Businesses which are deemed to come under

Cafe Business Valuation

Cafes are one of the most popular business categories in Australia. There are thousands of cafes sold every year. They are sold in such numbers because there are so many,

Mortgage Broker Business Valuation

Mortgage brokers have enjoyed a decade of prosperity in Australia with a booming housing construction market together with handsome trailing fees being paid to mortgage brokers by the banks and


The contents do not constitute legal advice, are not intended to be a substitute for legal advice, and should not be relied upon as such for any purposes. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.