06 Nov 2013
Words Tim Admin

Mining Boom Has Been Kind to the Motel Industry but Struggling Elsewhere

THE so-called "mining boom Mark II" is having major spin-offs in the tourism accommodation sector, especially in motels which are delivering some of their best returns in more than two decades. Resort Brokers managing director Ian Crooks said that since the January floods, his company had handled the sale of 41 properties and expected dozens more in the coming few months. "A lot of them are in mining areas or associated to mining," Mr Crooks said. "I have a saying, coastal for show, inland for dough, because that's where you make the money. "There's a big drive for investors to buy big motel leases in the mining areas where they've got huge cashflows, put managers in them and they still get about a 25 per cent return after they've paid their operating costs, their rent and their manager." In normal times, about 25 per cent of Queensland's 1100 motels change hands every year, following a four-year lifespan which investors generally have in a property. "The traditional tourism areas of the Sunshine Coast and the Gold Coast are really, really suffering, yet overall the economy for the motel industry is outstanding. In places like Dalby, Miles, Chinchilla, Roma, Bowen, Mackay, they are absolutely booming and it's all to do with mining," Mr Crooks told The Courier Mail. "They are very, very strong and with very high tariffs. Tariffs two years ago in some of the inland areas were about $90 to $100 a night, but in a lot of places now it's $150 to $160." He said with mining companies taking out 10 to 15 rooms at a time on longer terms, occupancy levels were pushed to the point where in places such as Bowen, Chinchilla and Emerald, no one could get a room from Monday to Friday. Mr Crooks said all that activity meant motel returns were in the 30 per cent region for leaseholders and 15 per cent for freeholders - which put investor interest at its highest level in decades. "The property that in all my years I've had the most interest for was 46 units, on the water, no restaurant, in Bowen which is a huge growth area of mining. I could have sold that one 25 times over, that's how high the interest was," he said. Mr Crooks said while hotel owners and managers might be suffering because the high Australian dollar was driving holidaying locals offshore, motels were seeing a resurgence with new trends emerging. Around 90 per cent of motels now, he said, were not freehold owner-operated, but run on leases. "We've got one client who owns 31 motels. It's a great commercial investment, because your tenant has paid a lot of money to buy the business which is non-transferable. So the appeal is around the property itself and that's why they never get into difficulty." Mr Crooks said investor interest in traditional tourism areas was low. "There are people that want to sell but they can't because they're overpriced, and there are better buys in mining areas where people are following the resource dollar," he said.