Motel Vs Management Rights

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

Motel leasehold
Management Rights
Lending ratio is up to 55% for leasehold
Lending ratio is up to 70%
Decision maker
Operator dealing with 1 owner (landlord) regarding decisions
Manager has to deal with numerous parties (owners) regarding decisions
Trust Accounts
No trust account
Trust account required
No licence required
Restricted letting licence required
Your income can’t be affected by owners taking the units from the letting pool
Owners have the option of withdrawing units from the letting pool9 eg: if they sell to an owner)
No owners live on site
Owners can live in their unit in the complex
No consent from the body corporate. Approval from landlord
Require consent from the body corporate to transfer the ownership
Return / Cash Flow
Higher return as you don’t outlay funds on separate real estate
Lower return as you normally have to purchase the managers unit that doesn’t produce any income
Up to 30 years on the lease
Up to 25 years on accommodation module and 10 years under the standard module for the term of the agreements
Location may not be as desirable as a management rights complex
Location can be right on the beach in major towns
Hours can be longer in motels
Hours are designated by the agreements.
Restaurants – operators might have to make breakfast. Have to have more staff
Very few complexes have a restaurant to worry about
Legislation is common law
The Management rights industry operates under the BCCCM Act giving greater protection to the operators
Top ups
Lease extension – operator may have to pay the landlord to extend the lease
Body Corporate is not entitled to receive a financial benefit of extending the agreements
Renovations to the units are borne by the operator
Renovations to the units are borne by the owners
Sales commissions
Can’t make additional income by selling units in the motel
Ability to make sales commission by selling units in the complex (with an appropriate licence)
Payable to the landlord for exclusive occupancy of the motel
No rent payable to the body corporate
Someone must reside onsite manage the business
Might or might not be required to live on site depending on agreements
GST on tariffs
Usually no GST on tariffs or rent
Set out in the lease – motelier completes role as required
As detailed in caretaking agreements