THE MOTEL INDUSTRY

The industry is defined as motels and guesthouse businesses with 15 or more rooms. These establishments provide accommodation in the form of rooms or suites, and some provide food and beverages on the property. Most motels have direct access to an open parking area. Most guestrooms are equipped with a bath or shower, but have limited in-room cooking facilities.

OVERVIEW

The industry comprises of some 2,400 establishments turning over a combined $3.0 billion of revenue, generating an annual EBIT of $340 million (Source IBIS World Industry Report H4402 Motels in Australia 2017–2018).

PRODUCTS & SERVICES

Industry operators primarily provide accommodation, usually in the form of suites or units with private facilities, though some facilities such as bathrooms may also be shared. Motels usually operate without liquor licenses but often provide meals. The term motel derives from ‘motor hotel’, as this form of accommodation has traditionally catered to motorists. Consequently, many industry establishments are located near main roads or highways. Most motels are rated three or four stars.

The largest services segment in the industry is three-star accommodation. Three-star rooms make up more than 60 percent of the total graded motel room supply (Source IBIS World Industry Report H4402 Motels in Australia 2017 – 2018). Compared with four-star accommodation, three-star establishments tend to have modest amenities and cater to more price-sensitive travelers. Consequently, three-star establishments tend to charge lower fees than four-star establishments. The number of three-star motel rooms in the industry has grown over the past five years, as motel owners have been catering to more budget-conscious consumers. As a result, this segment has grown as a share of industry revenue over the past five years.

Motels with a four-star rating account for the second-largest portion of industry revenue. Typically, four-star establishments operate predominantly in more major population centres. Although there are more three-star motels than four-star motels in Australia, four-star accommodation has greater earning potential due to the superior amenities and services it offers.

 

GEOGRAPHICAL MARKETS

The map below shows the geographical location of motels on a State basis (Source IBIS World Industry Report H4402 Motels in Australia 2017–2018

MARKET SHARE

The motels industry exhibits low market share concentration and is highly fragmented, with no individual operator holding a significant share of the market. While numerous motels are associated with members groups such as Best Western (approximately 150 hotels, motels, and resorts in Australian and New Zealand) or Golden Chain (approximately 250 member locations throughout Australia) for the provision of marketing services, administration and training support, and assistance with negotiations with the larger travel agencies, they are often small, privately-owned, single establishment operations.

The four largest operators account for substantially less than 40% of the industry revenue (Source IBIS World Industry Report H4402 Motels in Australia 2017 – 2018).

The larger operators are Choice Hotels and Silverneedle. Choice operate more than 270 hotels, motels and resorts in Australia, New Zealand and Singapore under numerous brands, many of which are franchised. Silverneedle also operate under several brands including Sundowner Inns and Country Comfort. Both brands service more affluent motel customers.

The rise of Airbnb has put additional pressure on the industry, particularly in more major population centres.