Motels vs Management rights

Motels and Management Rights have similar attributes in the accommodation industry, but also have their subtle differences.

TermMotel  leaseholdManagement Rights
LendingLending ratio is up to 55% for leaseholdLending ratio is up to 70%
Decision makerOperator dealing with 1 owner (landlord) regarding decisionsManager has to deal with numerous parties (owners) regarding decisions
Trust AccountsNo trust accountTrust account required
LicensingNo licence requiredRestricted letting licence required
IncomeYour income can’t be affected by owners taking the units from the letting poolOwners have the option of withdrawing units from the letting pool9 eg: if they sell to an owner)
OwnersNo owners live on siteOwners can live in their unit in the complex
ApprovalNo consent from the body corporate. Approval from landlordRequire consent from the body corporate to transfer the ownership
Return / Cash FlowHigher return  as you don’t outlay funds on separate real estateLower return as you normally have to purchase the managers unit that doesn’t produce any income
TermUp to 30 years on the leaseUp to 25 years on accommodation module and 10 years under the standard module for the term of the agreements
LocationLocation may not be as desirable as a management rights complexLocation can be right on the beach in major towns
HoursHours can be longer in motelsHours are designated by the agreements.
RestaurantRestaurants – operators might have to make breakfast.  Have to have more staffVery few complexes have a restaurant to worry about
LegislationLegislation is common lawThe Management rights industry operates under the BCCCM Act giving greater protection to the operators
Top upsLease extension – operator may have to pay the landlord to extend the leaseBody Corporate is not entitled to receive a financial benefit of extending the agreements
RenovationsRenovations to the units are borne by the operatorRenovations to the units are borne by the owners
Sales commissionsCan’t make additional income by selling units in the motelAbility to make sales commission by selling units in the complex (with an appropriate licence)
RentPayable to the landlord for exclusive occupancy of the motelNo rent payable to the body corporate
ResidencySomeone must reside onsite manage the businessMight or might not be required to live on site depending on agreements
GSTGST on tariffsUsually no GST on tariffs or rent
DutiesSet out in the lease – motelier completes role as requiredAs detailed in caretaking agreements