Motel Values in Australia: A Surge Driven by Demand and Scarcity

In recent years, the value of motels across Australia has soared, transforming these once-modest accommodations into sought-after assets for investors and developers. Fueled by a booming tourism sector, limited new supply, and a wave of institutional capital, motel valuations have seen consistent growth since the post-COVID recovery began in 2022. This blog post examines the factors propelling motel values, highlights specific market trends and investor activity, and offers a glimpse into the future of this evolving asset class.

The Post-Pandemic Value Boom

The COVID-19 pandemic disrupted Australia’s accommodation sector, with motel revenues plummeting in 2020-21 due to travel restrictions. However, motels staged a remarkable comeback as domestic tourism surged in 2022, driven by Australians eager to explore their own backyard. According to CoreLogic and industry reports, motel transaction values have risen steadily, with some regional properties achieving double-digit price growth since 2021. The average sale price for freehold motel properties in high-demand areas like Queensland and New South Wales has increased by approximately 15-20% over the past three years, reflecting strong investor confidence.

Motels’ appeal lies in their affordability and accessibility, catering to families, road-trippers, and workers in regional hubs. With average room rates climbing to $125-$135 per night (up 8% since 2021, per STR data), motels have maintained healthy profit margins, further boosting their valuations.

Key Factors Driving Motel Values

Several market dynamics have contributed to the rise in motel values:

1. Tourism Rebound: Australia’s tourism industry is thriving, with domestic travel spending up 18% year-on-year and international visitor numbers nearing pre-COVID levels. Motels in tourist-heavy regions like the Gold Coast, Hunter Valley, and Tasmania have seen occupancy rates climb to 60-75%, driving revenue growth and pushing up property values.

2. Supply Constraints: High construction costs and financing challenges have stifled new motel development. Colliers reports that new accommodation supply in regional areas is at a 10-year low, with only 1,200 new rooms expected by 2026. This scarcity has increased competition for existing motels, inflating sale prices.

3. Institutional Acquisitions: Large investors are entering the motel market, consolidating smaller properties into high-value portfolios. Notable examples include:

   • Aware Real Estate, which acquired a portfolio of six motels in Queensland in 2023 for $45 million, targeting properties near major tourist corridors.

   • NRMA Parks and Resorts, expanding its regional accommodation holdings with motel purchases in New South Wales in 2022, leveraging its brand to boost occupancy.

   • Elders Real Estate, facilitating high-value motel sales in Victoria, including a $12 million transaction for a single motel in Ballarat in 2024.

   • Starwood Capital Group, which entered the Australian market in 2023 with a focus on regional motels, acquiring properties in South Australia for redevelopment potential.

   These transactions have set new benchmarks for motel valuations, with cap rates tightening from 8-10% in 2020 to 6-7.5% in 2025 for prime assets.

4. Location Premiums: Motels in desirable locations command significant premiums. For example, a motel in Byron Bay sold for $18 million in 2023, a 25% increase over its 2019 valuation, driven by its proximity to tourist hotspots. Similarly, properties along Queensland’s coastal routes have seen values rise due to consistent demand.

5. Operational Flexibility: Motels’ low operating costs and ability to adjust rates in response to inflation have made them attractive to investors. Unlike hotels with high overheads, motels require minimal staff and can maintain profitability even during economic downturns.

   
   

Market Trends and Valuation Metrics

Motel sales are typically structured as freehold properties with goodwill, reflecting both the land value and the business’s earning potential. According to ResortBrokers, the average multiplier for motel sales in 2023-24 ranged from 3.5 to 4.5 times annual net profit, up from 3-3.5 times pre-COVID. For example, a motel generating $500,000 in annual profit could fetch $1.75-$2.25 million, depending on location and condition.

Leasehold motels, where the operator leases the land, have also seen value growth, though at a slower pace. Leasehold sales in regional Queensland averaged $800,000-$1.2 million in 2024, with investors drawn to their lower entry costs and high cash-on-cash returns.

Regional disparities play a significant role. Motels in urban-adjacent areas like Geelong or the Central Coast have outperformed those in remote locations, where occupancy struggles to exceed 50%. Properties with additional revenue streams, such as on-site cafes or conference facilities, also command higher valuations.

Challenges to Sustained Growth

While motel values are on an upward trajectory, several challenges could impact future growth:

• Economic Pressures: Inflation and rising interest rates have increased borrowing costs, potentially cooling investor activity. Some buyers are cautious about overpaying in a high-rate environment.

• Consumer Shifts: Budget-conscious travelers are increasingly turning to alternative accommodations like Airbnb or caravan parks, particularly in areas with limited motel options.

• Maintenance Costs: Many motels, built in the 1970s and 1980s, require significant capital expenditure to meet modern guest expectations, which can erode profit margins if not managed carefully.

  
  

Opportunities to Boost Value

Investors and operators are finding ways to enhance motel values:

• Refurbishments: Upgrading rooms, adding energy-efficient systems, or refreshing branding can increase occupancy and room rates. A refurbished motel in Cairns saw its value rise by 12% after a $1 million renovation in 2023.

• Technology Adoption: Online booking platforms and dynamic pricing tools are helping motels maximize revenue. SiteMinder reports that motels using direct booking channels saw a 15% revenue uplift in 2024.

• Diversification: Some motels are adding glamping pods or self-contained cabins to attract new guest segments, boosting both revenue and asset value.

  
  

The Future of Motel Values

Looking ahead, motel values are expected to remain robust, supported by Australia’s strong tourism outlook and ongoing supply constraints. Tourism Australia projects that domestic and international visitor spending will grow by 6% annually through 2027, benefiting regional motels. Institutional investors, including private equity firms and REITs, are likely to continue their acquisition spree, further driving up prices for quality assets.

For investors, the focus should be on properties with strong locations, high occupancy, and redevelopment potential. Operators can maximize value by investing in guest experience enhancements and leveraging technology to streamline operations. As motels cement their status as a staple of Australia’s accommodation landscape, their values are set to reflect their growing importance in a thriving tourism market.