Tourism Real Estate Update – July 2010

Selling Tourism PropertiesA couple of months ago we welcomed what appeared to be the end of the recession: wrong! Confidence in the small business sector has dipped again, according to recent surveys.

Uncertainty about upcoming GST increases, a depressed housing market, the strong likelihood of increasing mortgage interest rates through the remainder of the year, and the unknown impact of the emissions trading scheme on prices across the board,  have rather dampened people’s appetite for risk.

Buyer enquiry remains very strong, particularly from overseas, but buyers are even more careful in what they will take on. Overseas buyers are looking for a home and a business that will support them from day one.  They are already making the huge step to emigrate, so they are not prepared to assume even more risk in a doubtful business proposition.

Good businesses with a strong trading history and forward bookings continue to sell: but anything less than top performers is languishing.

Our advice is clear:

  • Every business in our sector should be looking to maximise its trading accounts.  Every dollar in revenue should be on the books – we can’t sell invisible cash.
  • Every feasible element of “potential” should be implemented – it is very difficult to sell vague possibilities (the standard buyer question when “potential” is discussed is to ask why it has not been done already).
  • Don’t neglect the owner accommodation. Yes, it makes sense to invest in your business rather than your living quarters but, as noted above, the residence is of prime importance to buyers.
  • If you are going to market, get the pricing right! Overpriced properties or businesses will just stagnate on the market. It is not rocket science: buyers need to make a reasonable return on their investment. Ask yourself: would I buy this, at this price, on this market?

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