04 Jun 2020
Words Greg James

There is momentum and positive signs in the accommodation market

Greg James:

I'm very lucky to be joined today by our Chairman and ResortBrokers legend, Ian Crooks. So we’re here to have a quick chat about the current situation, where we believe the market's going and just to give a wrap up about what’s going on.

As you know, my area is the Gold Coast and northern New South Wales, and we've had some pretty good movement in the last few months, even during COVID-19. We've sold a caravan park, we've received an offer on another particular property, so that all looks very good and very promising. There has been a lot more movement than what I think everyone expected.

Ian Crooks:

That’s not to say they've gone away, they will come back. So, we're expecting that there'll be quite a flurry when things get back to normal. This week alone, we've sold two motels, a management rights, you've got an offer on another property, and there's generally a lot more interest than we expected, and there's a lot of green shoots about.

Greg James:

It definitely feels that there's momentum in the marketplace.

Ian Crooks:

There is absolute confidence. I think the biggest downturn in the 46 years that I've been in this business happened in the 1991 recession. It was far worse than the situation we had in 2008/09 with the GFC. For those of you who can remember, the 1991 situation was the ‘recession we had to have’ and there was a 10 percent or 11 percent unemployment rate.

Greg James:

Which is higher than what's predicted now.

Ian Crooks:

But what actually had come out of that recession we had to have and what drove our business back into profit was the amount of enquiries we received and the amount of businesses we sold to people who were effectively buying a job. What was happening was that people were made redundant. Some of them were given payouts. Others just used the equity in their homes. But they were buying a business because they wanted security of employment on their own terms which is what this industry provides.

Greg James:

So, you'd probably even think that this time coming out of the pandemic with JobKeeper, people are still going to have some dollars in their pocket.

Ian Crooks:

I can tell you that some of the enquiries we've had, have been people that have been made redundant already and they're looking to buy themselves a business which generates solid returns.

Greg James:

I've spoken with a few people like that myself as well. So there's definitely movement in the market. And it just really doesn't seem like the doom and gloom predictions are as bad as is being portrayed.  

Ian Crooks:

Well, there's been some surveys done by banks and different people and the optimism and the enthusiasm is a heck of a lot stronger than it was at the 2008/09 downturn during the GFC. And certainly there’s a lot more enthusiasm than in 1991. We went into this gloval pandemic very quickly. It's one of the worst things the world's ever seen, obviously. There is talk of a V shaped recovery and there’s talk of a other types of recovery. But I think that in our business, we're in the business of selling motels and accommodation properties, and to be able to do that, you need to have people staying in them. There's a pent up desire for people to go travelling again.

Greg James:

And so people realise that, well, it's winter so they are going to head north to have a warm holiday to get out of that pent up sort of existence. Ian Crooks:

I spoke to some people yesterday who had booked to go to Bali this week. And they were saying that they were very annoyed and they know they won't be able to travel overseas. So they said, they're going to go to Port Douglas for their holidays as soon as they can. So that's just one person I spoke to and I'm sure a lot of people have that attitude. Greg James:

I suppose when we look at things as well, you've mentioned that the recession that we had to have back in 1991 was pretty heavy, but you know, we've had some other pandemics such as SARS, which hit in 2002 but was contained relatively quickly.

Ian Crooks:

But people did fly internally. They stayed, they didn't go overseas because everyone was scared to go to Asia. And so for a year or two years, local tourism did a lot better. And I'm sure the same thing is going to happen. And apparently I've read reports where a lot of the islands, the major islands and the Whitsundays, have received heavy bookings and a lot of those islands are expensive to stay at instead of the people going to Europe.

Greg James:

They're coming to holiday here. So that's great news for Queensland and northern New South Wales. Here at ResortBrokers, we're a national company and have 30 brokers across the country.

Ian Crooks:

Our WA Specialist Blair Macdonald has sealed three deals which have taken some time and he's got three sales tied up this week. Our people in Victoria, Damon Lunardello and Damien Loorham, have been busy and they secured a sale there this week and New South Wales is going really well.

There's been a number of sales in New South Wales and a lot of interest. And Queensland, which is our home base, is going pretty well. The other part of our business, and a big part of our businesses, is management rights. There are a lot of enquiries and some sales and I'm aware of three or four really big deals that should get signed off in the next three or four weeks. That'll make us smile.

And for those operators who have, say, a 20 room motel and you're thinking, "well, what does that do for me?" What that does for you is that when people are making money, they're spending, and also they're creating confidence. And I don't know whether you've noticed it, Greg, but I've noticed that the streets are a lot busier than it has been recently. So I'm buoyed and I'm excited by that.

Greg James:

You mention the shopping centres and everyone is just itching to get down to the pub and the local cafes and getting back to some normality. And as far as we're all concerned, it really is just around the corner now.

One key issue I’d like to discuss is the banks’ attitude. Do they know what they’re doing yet?

Ian Crooks:

The banks have said to some clients that they will provide finance if the property they want to buy is going well, especially in permanent management rights.

Motels and holiday management rights are a little bit more difficult because people are not in there and staying just yet. I think the banks seem to be conservative. And why wouldn't they be? But the bottom line of all this is that the banks are in the business of making money, and that's how they make their money.

Greg James:

But when we come out of this, then the properties like the 20 room motels and caravan parks will start to turn revenue again and the banks will look favourably at this.

Ian Crooks:

Absolutely, and of course banks will rely on valuers, and the valuers that we've spoken to are all saying, “we'll be able to do an evaluation if we have three years figures, and we'll take this period out”. And once we get through this period, and there's three months of good figures, they reckon that they should be able to evaluate again at this stage.

Greg James:

Well then touching on that, what are the banks going to be looking at? What three things should a motelier or caravan park owner be doing right now, if they're looking at selling in the next year or two?

Ian Crooks:

I think the first thing that you need to ask yourselves is, "are we going to stay in, do we want out, or are we going to stay in for the long haul?" That's number one. If you want out and want out quickly, whether you will get the same money, you would have pre COVID-19 …  I doubt it currently.

But they're decisions that you will have to make yourselves and I think the thing is that you need to start to promote your property. I would advise if I owned a motel or a caravan park, I'd be going through all the people that stayed in the last couple of years, and I would be sending out, with technology it's so easy to send a group email.

I'd be writing to them all to say, “we're looking forward to seeing you again, we're open, our park or our motel is very tidy and we've had three months to really get around and do things that needed doing, and we're looking forward to seeing you”. Be enthusiastic. It's got to start with some enthusiasm and welcoming guests to your place.

Greg James:

Well, at the end of the day, I think we all should be very, very happy that we live in Australia. We've come through this pandemic compared to the rest of the world, pretty well unscathed.

Ian Crooks:

Well, and I think that all levels of government have been absolutely fantastic. The response from National Cabinet has been outstanding.

Greg James:

Before we wrap this up, any other thoughts?

Ian Crooks:

Well, two key things. There'll be opportunities because adversity always brings opportunities. But for those of you who are happy to stay in your business, stick in there, hang in there, you knew how well you were doing before this situation and I'm sure you will do just as well within three to four months.

I reckon by January, we'll be back into it fully. And so I wish you all the very best and you know, that any of us at ResortBrokers will be able to help you if we can. And give Greg a call if you need anything. He’s one of the best in the business.

Greg James:

Thanks Ian, I really appreciate that. I'll add also, as with all of us at ResortBrokers, I plan to get out on the road very, very soon, when it frees up and I look forward to seeing you all and to work with you, to get through this and get out the other end, all smiling and happy and ready to go.

Greg James  

Greg@resortbrokers.com.au

Ian Crooks 

Ian@resortbrokers.com.au

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