Buying a motel in Australia can be a rewarding investment, but knowing what it's truly worth is crucial. Whether you're considering a leasehold or freehold motel, understanding the underlying value of the business—not just the asking price—is key to making a smart and confident purchase.
Here's how to assess the real value of a motel business before you sign on the dotted line.
1. Start with the Financials
The most common way motels are valued in Australia is using a multiplier of the net profit—also known as the adjusted net profit or PEBITDA (Proprietor's Earnings Before Interest, Tax, Depreciation and Amortisation).
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Leasehold motels typically sell for 2.5 to 3.5 times the adjusted net profit, depending on quality, location, and lease terms.
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Freehold going concern (FGC) motels are generally valued at 7 to 9 times the adjusted net profit, as you're purchasing both the business and the land/building.
Ask for at least three years of financials, and make sure they're verified by an accountant. A sudden spike in income might not be sustainable, and seasonal patterns should be understood.
2. Review the Lease (if leasehold)
For leasehold motels, the lease terms are a major part of the value. A lease with 25 years remaining is much more valuable than one with just 5 years to go.
Key things to assess:
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Remaining lease term and options
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Annual rent and rent increases
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Responsibilities for maintenance, capital works, and insurance
Also, check if the lease is assignable—this will affect whether you can eventually sell the business.
3. Location and Demand
Location heavily influences a motel's earning potential. Motels near highways, hospitals, airports, or mining towns often have strong corporate or repeat trade. In contrast, those in regional or tourist areas may have fluctuating income tied to seasons.
Use tools like local tourism data, online reviews, and occupancy rates in the area to get a sense of future potential.
4. Occupancy and Room Rates
Occupancy rates (how often rooms are booked) and the average daily rate (ADR) are two major performance indicators.
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A motel with 70–80% occupancy at a solid room rate may be more valuable than a larger motel operating at 50%.
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Compare these figures to industry benchmarks or nearby competitors.
Don't forget to consider online booking platforms (OTAs)—a strong digital presence may already be driving much of the motel's success.
5. Operational Efficiency
What's included in the sale? Does the current owner work full-time in the business? Are there reliable staff or systems in place?
If the business is run with minimal input from the owner, that's often more attractive to buyers and investors.
Also check:
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Cost of wages and cleaning
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Software and booking systems in use
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Contracts with suppliers or agencies
6. Physical Condition and CapEx
The condition of the rooms, fixtures, and general infrastructure can significantly affect value—especially for freehold buyers.
Get a building inspection and inventory report done. You don't want to spend $100,000 on urgent upgrades right after settlement. This is also important when negotiating the final price.
7. Brand, Reviews & Reputation
A motel with a strong name, good customer reviews, and repeat guests holds more intangible value than one with negative feedback and poor branding.
Check:
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Google, Booking.com, and TripAdvisor reviews
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Presence on social media or websites
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Any awards or affiliations (e.g. AAA rating, associations)
Final Thoughts
Motel valuations in Australia are about more than just numbers. You're buying not only income, but also future potential, lifestyle, and risk. Engage a business broker or motel specialist accountant to help you through the due diligence process. When done right, assessing a motel's true value can help you secure a solid business and a long-term return on investment.
