Selling Tourism Properties: Lessons from the Summer

Selling Tourism PropertiesAs promised, it has been a very busy summer season.

Visitor arrivals in December 2009 were 341,300, up 6% on December 2008 and the highest number of arrivals ever recorded for a month, according to Statistics New Zealand.

Markets showing strong growth included Australia (up 11%), USA (up 12%), Singapore (up 22%), France (up 26%) and India (up 25%). The US arrivals increased despite 500 fewer cruise ship passengers from that market compared with December 2008. Markets showing declines included China (down 16%) and South Africa (down 21%).

That record visitor number has been reflected in very positive occupancy reports from operators in our areas of the Waikato and the Coromandel Peninsula. It is to be hoped that the relatively late arrival of summer will bring more full beds and tables for a month or two yet.

On the buying and selling front, we have experienced massive buyer enquiry over this summer.  However, a great deal of that has been from the UK, driven no doubt by their appalling winter weather. Such enquiry has slowed, as things improve over there!

The problem with offshore enquiry is that too many people are simply not ready to do anything: they have assets to dispose of before they can buy (not easy in the current climate) and have not even commenced the lengthy process of arranging visas.  Many of the expressions of interest should be dismissed as mere tyre-kicking: but of course, it takes serious investigation to discover an enquirer’s real position.

There are real buyers out there, but they are being very selective about what they inspect. We have buyers who have investigated over a dozen properties throughout the country and still have not found anything that meets their criteria.

So the lessons of the summer have been:

  • Tourism and hospitality remain a vital part of New Zealand’s economy and you are all playing an important part in earning our way as a country. The outlook for tourism is encouraging again.
  • Vendors need to be realistic about their expectations. Sadly, many who purchased 2-3 years ago are unlikely to get back what they paid, unless they have radically improved trading performance over that time
  • The value of any property or business is what a willing buyer will pay: and that is driven fundamentally by the vendor’s financial performance over the last 2-3 years, plus the prospects of that performance continuing into the future
  • Many properties’ past “value” has been underpinned by land values that were based on re-development potential.  That price support is no longer valid and may not be so for some years
  • Finance remains a major problem, with banks reluctant to lend.  Leases are of little interest to them: buyers need cash to get into these businesses.  Freeholds are a more attractive to the banks, but they’ll still want solid trading figures and a recent registered valuation from a reputable valuer. Keen vendors will see a valuation as a priority marketing investment.

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