What Is My Motel or Serviced Apartment Business Really Worth?
Liz Galea, Director and Principal Agent
One of the most common questions I hear from accommodation owners is simple: "What is my business worth?"
The answer is rarely straightforward.
Unlike residential property, motel and serviced apartment valuations are driven by business performance, lease terms, location, market conditions, and buyer demand. Getting the valuation wrong can mean leaving money on the table or pricing yourself out of the market altogether.
After nearly three decades as an operator, franchisee and broker, I've learned that understanding how buyers assess value is one of the most important steps an owner can take before selling.
It Starts With EBITDA
Most accommodation leasehold valuations begin with EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation).
Put simply, EBITDA measures the true earning capacity of the business before individual financing and tax decisions are considered. Buyers aren't purchasing your tax return; they're purchasing future earnings.
The basic formula is:
Normalised EBITDA × Market Multiple = Indicative Value
Both components are equally important.
Why 'Normalised' EBITDA Matters
Normalised EBITDA reflects what a new owner could reasonably expect to earn from the business.
Adjustments often include:
Owner salaries above or below market rates
One-off expenses or income
Personal expenses run through the business
The selection of trading periods used to calculate earnings
Clean, well-documented financials give buyers confidence and usually result in stronger offers. Poorly presented accounts do the opposite, regardless of how well the business is actually performing.
What Influences the Multiple?
The market multiple represents what buyers are willing to pay for each dollar of earnings. It varies depending on the quality and risk profile of the business.
Factors that generally increase value include:
Longer lease terms remaining
Strong and diversified demand drivers
Consistent trading history
Well-maintained facilities
Sustainable rent-to-revenue ratios
Factors that can reduce value include:
Short or expiring leases
Heavy reliance on a single customer or booking source
Significant deferred maintenance
Financial results that are difficult to explain or justify
Ultimately, buyers pay more for certainty and less for risk.
Leasehold vs Freehold
For leasehold motels, valuation is primarily based on business earnings and lease quality.
Freehold going concern properties are more complex because both the business and the real estate must be assessed. In some cases the property's value is the dominant factor; in others, trading performance drives the result.
For freehold owners, the key question is often whether selling the business and property together is the best approach, or whether another structure may deliver a better outcome.
Common Vendor Mistakes
The same issues appear repeatedly when accommodation businesses underperform in the market:
Pricing based on the best trading year rather than sustainable earnings
Going to market with incomplete or messy financials
Failing to understand lease terms before selling
Using a broker without accommodation industry expertise
Most of these problems can be avoided with good preparation.
The Best Time to Start Planning Is Early
Owners who achieve the strongest sale outcomes rarely make a quick decision to sell.
They spend time improving financial reporting, maintaining the property, understanding their lease position, and seeking professional advice well before going to market.
Even a 12-month preparation period can have a significant impact on buyer confidence and business value.
Final Thoughts
Valuation is not an exact science. It's a balance between what the market is willing to pay and what the business can reliably deliver.
The more you understand that process, the better positioned you'll be to maximise value when the time comes to sell.
If you're wondering what your motel or serviced apartment business may be worth in today's market, an informed conversation with a specialist can provide valuable clarity long before any decision needs to be made.