Movements of the motel industry

The industry’s future success lies in operators’ ability to cater for emerging tourist needs and identify and achieve the correct positioning within the broader tourist accommodation industry.

Industry performance is linked to current and emerging trends in domestic tourism – a mature component of the tourism industry, and currently in decline – and international visitor arrivals, which are experiencing only marginal growth due to ongoing fierce global competition. Motels operate within a very competitive tourist accommodation market, with a variety of accommodation styles and quality available at a range of price points, to suit particular tourist market needs.

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When economic conditions are dull, price-based competition tends to accelerate and is usually led by tourists seeking more value. Competition rises within the industry, as well as from competing accommodation industries such as hotel accommodation, serviced apartments and quality cabins in caravan parks. As a mature industry, the future performance of motel operators lies with strengthening their existing position and appeal within the wider tourist accommodation market and continually adapting to changing domestic and international tourist market needs.

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It is projected that the motel accommodation industry will generate $2.7 billion in revenue in 2010-11, which represents acceleration in real growth of 3.0% due to rebounding economic conditions coupled with a downward trend in unemployment. These factors will positively stimulate growth in household disposable income and business profit, leading to some revival in domestic corporate and holiday travel, which are both important components of industry demand. Competition, however, will remain from the growing propensity for Australians to travel overseas for holidays.

According to the Australian Bureau of Statistics, total tourism consumption expenditure in 2007-08 was $88.7 billion, while output was $81.8 billion and contribution to Australia’s gross domestic product was $33.7 billion. The motel accommodation industry, therefore, contributed an estimated 2.6% to GDP. All components of the tourism sector were estimated to have contributed $5.0 billion to Australia’s GDP of which an estimated 22% was generated solely by motel accommodation.

For 2010-11, the industry is anticipated to comprise about 3,059 enterprises, representing growth of 1.2% over the previous year, due to the forecast revival in domestic travel as well as some growth in international tourist arrivals. In addition, this industry is calculated to operate at about 3,811 establishments or locations, up 1.3%. The industry will employ about 32,975 people representing growth of 1.6%, and wages paid for the year will reach $733 million, due to real growth of 1.8%.

Key success factors:

Being part of a group buying, promotion and marketing scheme: Motels benefit from being part of a chain/franchised operation to take advantage of group buying and advertising/promotions, as well as Internet booking sites.
Development of a symbiotic relationship with another industry: Industry players should develop packages with other significant tourist infrastructure in the local and regional area to build on synergies and attract tourists.
Having a loyal customer base: Development of a loyal and repeat customer base through good word-of-mouth recommendations is a key success factor for industry players.
Carrying out all necessary maintenance to keep facilities in good condition: It is important that the motel’s facilities are always maintained to a high standard.
Having a good reputation: Motels should aim obtaining good word-of-mouth recommendations and repeat custom through providing good quality facilities and hospitality.
Ensuring pricing policy is appropriate: Motels should try to avoid being part of a significant tariff discounting war to attract custom.
Optimum capacity utilisation: Understanding and coping with seasonal and weekday and weekend fluctuations in demand, and having off-peak tariffs and specials are important key success factors.
Market research and understanding: Motels will benefit from understanding and monitoring changes in local and regional tourism/travel market where the motel is located.