TelferYoung (Nelson) Limited

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Nelson Newsletter - October/November 2009

3 November 2009

Welcome to another edition of the TelferYoung Nelson newsletter.

Hospitality Update

The Year In Review

A tough year for the hospitality industry due to the global recession which has had an impact on travel activities worldwide, also the Swine Flu outbreak which created a sharp but temporary decline in international travel, particularly from Asian markets. 

Statistics New Zealand figures for the Latitude Nelson region, for the year ending 30 August 2009, indicate total guest nights were 1.234 million.  A decrease of 3.7% on the previous year and an average occupancy of 27.2% across all accommodation types.

Latitude Nelson Total Guest Nights - Latest 3 Years

The graph of total guest nights over the last 3 years shows the demand pattern has been falling steadily since April last year but appears to have stabilised over the past two months.

Average occupancy rates for individual accommodation sectors within the Latitude Nelson region over the past 12 months are: 

Statistics New Zealand figures for the Latitude Nelson region indicate total guest nights for August were up approximately 2% on the same month last year with a 1,000 additional visitors through the region.

Forecasts 2009-2015

The Ministry of Tourism have forecast visitor arrivals to New Zealand are expected to increase 18.6%, representing average growth of 2.5% pa over the 7 year forecast period to 2.9 million visitors.  The largest growth is expected to occur in the Chinese market with growth of 62.6% projected.  By comparison, the Japanese market is expected to contract by 1.6%.  For Nelson, international visits are expected to increase by 14.9% to 607,000 in 2015.

Therefore, the outlook beyond 2010 is positive as world economies are expected to improve and normal travel patterns re-establish. 

General Market Comment

After a period of hiatus, we at TelferYoung, have noticed increased activity in the market place with enquiry from prospective purchasers and a number of transactions occurring.  A stark contrast to the situation of 12-18 months ago.

Motel brokers report increased enquiry, although this is offset to a large extent by the number of leasehold business available for sale, with buyers being in a strong negotiating position.

Prospective purchasers report finance is difficult to obtain, however our enquiries with major lenders indicate enquiry from new clients is welcomed.  Lending margins appear to be between 30%-40% of the lease business value, as assessed by a Registered Valuer and 60% of the Freehold land and buildings value.  These ratios vary depending on the financial viability of the businesses and ability to offer collateral security.

Accommodation Business Sales Noted

Sales occurring in the Top of the South region this year include:

• Marlborough - a modern Qualmark five star 16 unit complex, sold in March 09 for $2,750,000 as a Freehold going-concern.
• Marlborough - the business lease of a modern Qualmark four star 18 unit motel, sold in July 09 for $865,000.
• Marlborough - the business lease of a modern Qualmark four star plus 10 unit motel, sold in June 09 for $520,000.  The property previous sold in March 07 for $595,000.
• Marlborough - the business lease of a dated 21 unit complex sold in March 09 for $625,000.
• Nelson - the business lease of a 1960's and 1970's style 15 unit motel complex, sold in August 09 for $170,000.  The property previously sold in June 07 for $330,000.
• Nelson - the business lease of a modern Qualmark four star plus 12 unit motel complex. Sold in May 09 for $540,000.  Property previously sold in June 07 for $655,000.
• Nelson - the business lease of a modern 51 bed backpacker, sold in March 09 for $333,000.  Previously sold in June 08 for $312,500.

Hospitality Freehold Sales Reported     

Lonestar Cafe & Bar, 88 Hardy Street, Nelson - this modern two storey building sold in July 09 for $1,410,000 reflecting a return of 8.2% based on a 12 year lease.  Also changed hands in January 09 for $1,150,000.

Kohatu Hotel - vacant older style two storey hotel sold with vacant possession in August 09 for $330,000.

California House Inn - this turn of the century eight bedroom Qualmark five star rated bed & breakfast sold in September 09 for $1,005,000.

Commercial Hotel, Murchison - the realty of this older style upgraded country cafe with bar and accommodation sold in January 09 for $610,000 as part of the sale of the going-concern.

Rose Cottage Motel & B&B, Takaka - 1980's three bedroom dwelling and three motel units, sold at auction in May 09 for $850,000.

In some cases, the sales quoted have been supplied to us by third parties.  We believe the information is correct, however we can not guarantee its accuracy.

Specialist Valuation Services

Wayne Wootton is our specialist hospitality and tourism valuer.  Wayne has over 25 years experience as a Valuer and 7 years hands on experience operating a very successful accommodation business.

Wayne is able to provide specialist valuation advice for all types of tourism properties, from going concerns through to land and buildings investments.  Valuations can be provided for market appraisals, mortgage security, rental assessments and reinstatement insurance. 

Back issues of the newsletter can be obtained from TelferYoung (Nelson) Ltd
Phone (03) 546-9600
Fax (03) 546-9186
www.telferyoung.com
email: nelson@telferyoung.com

+ Ian McKeage + Rod Baxendine + Bryan Paul + Ashley Stevens + Wayne Wootton