The ongoing covid-19 pandemic has caused mass disruption in virtually every industry on the planet. Motels in small country towns across Australia are experiencing their fair shares of ups and downs as international travel is off the table and Australian tourists are restricted to travelling domestically.
Craig Dangar from C&D Restructure & Taxation Advisory says that one of the biggest challenges faced by rural motels in the age of covid-19 is the inability for establishments to make long term bookings as strict lockdowns can be introduced by government officials at short notice when an outbreak of the virus occurs in the community. “The cancellations that are being run through the booking systems are necessary but can make planning hard, in early January when Brisbane went into lockdown a small town like Stanthorpe had 100% cancellation rates, it is tough for an operator. Equally in the absence of traditional long-term bookings for motels for sales or travelling staff can make things tough” says Mr. Dangar.
For many years’ motels were a focal point of the everyday life in small country towns across Australia. Traditionally the majority of motels would have a restaurant attached to it which was frequently busy most nights of the week and immensely popular with locals and tourists alike.
Over time people living in rural towns have begun to open up restaurants of their own thus giving locals in the area more variety to choose from for their dining experiences. As a result of this rural motels have had to change their business model and nowadays many of them predominately operate as a place that exclusively offers accommodation and no longer has a restaurant attached to its premises.
In order to survive in the long run Craig Dangar contends that many rural motels have no choice but to keep moving along with consumer trends and therefore will have to consider undergoing some form of restructure to increase the likelihood of their business remaining financially viable. “It’s time for motels to critically assess their business lines and their costs. Unfortunately, things like pools, BBQs, underutilised kitchens and function spaces need an analysis and if they are not profitable then they need to be closed or re-purposed” says Craig Dangar.
In some parts of Australia small towns are battling a problem with an oversupply of a service that is in very small demand. There are small towns with populations of under 1000 people that still have up to three motels located in their community. Since there is a lack of visitors to the area this is deemed unnecessary and, in some cases, there are motels that have up to 70 rooms. It is predicted that motels in these types of situations will struggle to make money as the likelihood of them being in a position to house 100% capacity is very unlikely.
With the growing popularity of online marketplace style accommodation such as AirBNB the chances for many Australia rural motels remaining profitable is becoming slimmer each year. “Over the past decade plenty of competition has arrived, costs are increasing and room rates in rural motels have not reflected this. The shift, even in small towns, for food offering to be away from accommodation has continued and finally consumer wants have changed, the product, for the most part has suffered from underinvestment and a lack of meeting the market”. says Craig Dangar.
The impact that AirBNB has had on the motel industry is often compared to the impact that rideshare services such as Uber have had on the Taxi industry. Craig Dangar believes that even with the ongoing threat of covid-19, AirBNB will continue to grow in popularity with Australian domestic travellers as “people are more likely to want a more expansive accommodation option”. In 2021 even, small towns with populations of under 500 people tend to have access to AirBNB options whereas in previous generations before the internet existed checking in at the small towns one and only motel was the only option for visitors who were looking to stay overnight in a rural area.
As it becomes harder for rural hotels to make money; customers are lost to alternative and often more innovative forms of accommodation. For a number of rural motels not making any profits means that there is a lack of opportunity for the business to renovate damaged or old parts of the property. There is a lack of money to repaint walls, upgrade to faster internet, repair cracked tiles or to purchase new forms of technology or kitchen appliances after they have broken down over time. For some businesses there are comments left on their social media platforms posted by visitors comparing how the motel looks at the present time to how much more sophisticated it looked twenty years ago.
Having negative comments associated with your business left on social media has a huge influence in deterring potential customers from deciding to book accommodation with your business. These customers are therefore forced to look elsewhere for another form of accommodation that has more positive reviews online and meets the tourist’s expectations of what they perceive as being good value for money.
It was noted that many rural motels who were receiving bad reviews online were not responding to the negative feedback left by customers on their social media platforms. By not responding to the criticism there is a lost opportunity for the business to redeem itself and to potentially persuade the dissatisfied customer to consider staying at their accommodation at a future date despite their bad experience. By not trying to engage with dissatisfied customers on social media, the rural motel is losing an opportunity to re-frame a negative situation and offer a solution to enhance the customers experience if and when they decide to return to the motel at a future date.
Although there are many difficulties rural motels experience when trying to achieve their financial goals and remain competitive with AirBNB; rural motels have recognised the importance of providing visitors with impeccable customer service and being attentive to their needs to ensure their stay at the property is as positive as possible. Craig Dangar says that “little things help make the businesses improve. Whether giving car windows a wash at night, a courtesy lift into town for satellite motels (especially where the food was discontinued), fresh baked items (as opposed to a two biscuits in plastic wrap), barista made coffee and a clean reception area all work” says Craig Dangar.
Mr. Dangar continues that “offering real coffee was a major benefit. This was achieved by making the front reception staff undertake a barista course. This was a significant improvement and offering a takeaway coffee to departing customers was well-received. Having barista style coffee available on site also meant that visitors were spending more money within the motel and no longer needed to purchase coffee from a café located separately from the motel” says Craig Dangar.
With international borders closed due to the pandemic 2020 saw many Australians go on holidays to small towns located within the same state that they live in particularly in states like Queensland and Western Australia where border restrictions have been considerably stricter in comparison to the rest of the nation.
“International travel has changed and arguably for the long term, as people are now experiencing what our small towns have to offer and it would be expected that they will continue to thrive with domestic tourism” says Craig Dangar.
In Queensland tourism accommodation bookings in Bundaberg and North Burnett Area was up 30% from this time last year. On the other side of Australia accommodation bookings in The Great Southern & South Regions of Western Australia have been up by 37% in the same period.
Accommodation in Kalbarri a small Western Australian town located 570 kilometres north of Perth has been booked out for the past several months. The town which has a population of just over 1,300 people has also run out of accommodation to house more people who are employed to work in the region to keep up with the large number of tourists.
With such a sudden rise of tourists coming about as a result of the pandemic, it makes it difficult for rural motel owners to prepare for and meet the expectations of tourists visiting a regional town that wasn’t used to seeing such a large number of visitors prior to 2020. “Time has generally not been friendly to motels and there is a functional reality that these businesses are in decline without rationalisation of their cost structures. When compared with alternative accommodation, I would argue that there has been substantial cost rationalisation that has not occurred for motels” says Craig Dangar.
When the Victorian Government closed their borders to anyone who had travelled to New South Wales in December 2020, hundreds of Victorians who had been holidaying in Queensland were forced to undertake a 46-hour drive via the regional Queensland town of Birdsville and South Australia to finally re-enter Victoria.
Birdsville has a tiny population of just over 100 people and in a world prior to covid-19 receives virtually no tourists at Christmas time. However, this year due to covid every single motel room was booked over the Christmas period and the local pub received over 70 bookings between Boxing Day and New Year’s Eve. Many Victorians who were unable to find accommodation were forced to sleep in their cars overnight as they travelled home.
The impact that covid-19 has had on the tourism and hospitality will be felt for years. Brian Chesky the co-founder of Air B N B is predicting that in the future there will be a redistribution of where people travel. This means that instead of having the majority of people travel to some of the world’s largest cities people will be more enthusiastic about travelling to smaller regions in different parts of the world. Instead of getting on an aeroplane more people are getting into cars and driving a couple hundred kilometres to a small community where they were willing to stay in a hotel, motel or house.
As more people are forced to work from home in the age of covid-19, this quintessentially means an employee has the ability to work from any home or building. This could also include hiring out a motel room for a few days to work whenever an individual is wanting to travel outside their city or town of residence. Since international travel is off the table and work conferences cannot be held in big cities outside of Australia, there is an opportunity for some employers to take their employees out into the rural parts of Australia for business related trips.
Despite the unpredictable nature of the rural motel industry; Craig Dangar asserts that looking into the future “good motels will always do well and the operators are the key to this. We are seeing more automation and less touch points with consumers and this will continue over the next ten years, where the room key vending machines arose in the last ten year, the next would conceivably include no staff or limited staff in venues” says Craig Dangar.
Embracing new forms of technology and implementing them into the motels business model has the capacity to play a crucial role in cutting-costs for motels that are currently suffering from financial distress. Although automation will ultimately take jobs, but it could be the difference in deciding whether or not a rural motel is able to remain open for future generations. “A well run and potentially tourist-based venue is more likely to thrive as things continue to be tough, there needs, however to be a differentiation as competition is rising and from different sources” says Craig Dangar.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
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