MOTEL FOR SALE IN ONTARIO – MOTEL & HOSPITALITY PROPERTIES

Motels for Sale in Ontario

Buying a motel for sale in Ontario can involve considerably more
than purchasing an income-producing commercial building. Depending on the
transaction, the acquisition may include land, buildings, guest rooms,
furniture, fixtures and equipment, operating systems, business goodwill,
reservation accounts and other hospitality assets.

In addition, motel opportunities range from smaller owner-operated roadside
properties to larger limited-service hotels and established hospitality
businesses. Therefore, buyers should understand exactly what is included in
the transaction before comparing asking prices.

If the acquisition includes commercial real estate, review our

guide to buying commercial property in Ontario

for additional information about property due diligence and acquisition
planning.

Types of Motels and Hotels for Sale in Ontario

Before comparing a motel for sale in Ontario, buyers should
identify the hospitality property format that best fits their investment
strategy, available capital and preferred level of involvement.

What to Review Before Buying a Motel in Ontario

A professional review of a motel for sale in Ontario should
consider both the operating business and the underlying commercial real estate.
The scope of the investigation will depend on the property, financing,
transaction structure and intended future use.

Room Count and Accommodation Mix

Confirm the legal and operational number of guest rooms rather than relying
only on marketing material. Buyers should also review room sizes, bed
configurations, suites, accessible rooms, kitchenettes and any rooms that are
currently unavailable or used for storage, staff or management.

Occupancy, ADR and RevPAR

Hospitality performance should be evaluated using operating information over
multiple periods. Important measurements can include occupancy, average daily
rate, revenue per available room, room revenue, other operating revenue and
seasonality.

The Province of Ontario publishes tourism research and statistical information
that can provide broader market context when evaluating tourism and
accommodation activity.

Ontario Tourism Research and Statistics

Historical Financial Performance

Buyers should review several years of financial statements and available
supporting records. Revenue should be compared with reservation reports,
merchant statements, bank deposits and other reliable operating documentation
where available.

In addition, operating expenses may include payroll, utilities, property tax,
insurance, repairs, housekeeping, laundry, booking commissions, franchise
fees, management expenses, internet, television services, supplies, snow
removal and other hospitality costs.

Building Condition

A motel or hotel property can require substantial ongoing capital investment.
Therefore, buyers should examine the roof, building envelope, windows,
plumbing, electrical systems, HVAC equipment, hot-water systems, parking
areas, drainage and other major building components.

Guest Rooms and Furniture, Fixtures & Equipment

Guest rooms should be reviewed individually where practical. Important items
may include flooring, furniture, mattresses, bathrooms, fixtures, appliances,
HVAC units, locks, televisions and other room equipment.

A buyer should also establish which furniture, fixtures and equipment are
included in the purchase and identify equipment that is leased, financed or
owned by another party.

Motel Property and Site Due Diligence

Zoning and Permitted Use

Before purchasing a motel property, confirm the applicable zoning and permitted
use with the municipality. Existing motel operation does not automatically
mean that every proposed expansion, redevelopment or change of use will be
permitted.

Parking and Vehicle Access

Buyers should review available parking, driveway access, circulation,
commercial vehicle accommodation where relevant, snow-storage requirements,
site lighting and visibility from surrounding roads.

Municipal Services, Well and Septic Systems

Not every Ontario motel is connected to municipal water and sanitary sewer
services. Rural and highway properties may rely on private well and septic
systems.

Therefore, buyers should determine the property’s servicing configuration and
obtain appropriate professional inspections or testing where required.
Capacity should also be considered if future room expansion or redevelopment
is contemplated.

Environmental Due Diligence

Environmental due diligence may be appropriate when acquiring motel real
estate, particularly where the site has historical fuel storage, former
commercial uses, neighbouring potentially contaminating activities or other
environmental concerns.

Depending on the property history and lender requirements, buyers may consider
a Phase One Environmental Site Assessment and further investigation where
recommended by qualified professionals.

For additional information, review Ontario’s

Phase One Environmental Site Assessment guidance
.

Motel Business Only vs. Property and Business

When reviewing a motel for sale in Ontario, determine exactly
what the asking price includes. Two hospitality listings with similar room
counts can represent completely different transaction structures.

Business Only

In a business-only acquisition, the buyer purchases the operating hospitality
business and specified assets but does not acquire the underlying land and
building.

Consequently, the lease becomes an important component of the acquisition.
Buyers should review lease term, renewal options, rental increases, assignment
requirements, operating obligations and responsibility for major building
repairs.

Real Estate Only

A real-estate-only transaction may involve the acquisition of the motel
property while the operating hospitality business is excluded, closed or
operated by a tenant.

Property and Operating Business

A combined transaction may include the land, building, operating business,
furniture, fixtures, equipment and goodwill. Therefore, buyers should
understand how the purchase price is allocated and which assets are specifically
included in the agreement.

How to Evaluate a Motel Business for Sale

Room Revenue

Gross sales alone are not enough to evaluate motel performance. Buyers should
consider occupancy, average room rate, room availability, length of stay,
seasonality, cancellations, discounts and the mix of direct and third-party
reservations.

Online Travel Agency Commissions

Many accommodation businesses obtain reservations through online travel
agencies. As a result, buyers should understand the percentage of bookings
originating through third-party platforms and the commissions associated with
those reservations.

Operating Expenses

Important costs may include labour, housekeeping, laundry, utilities,
maintenance, insurance, booking commissions, property taxes, franchise fees,
marketing, internet services, television services and management.

Normalized Net Operating Performance

Owner-operated properties may contain personal expenses, owner wages or other
items that require adjustment when analyzing normalized performance.
Therefore, buyers should work with their accountant and other advisors to
understand the sustainable economics of the business.

Financing a Motel Purchase in Ontario

Financing a motel for sale in Ontario can depend on the
property’s location, physical condition, historical operating results,
purchase price, borrower experience, available equity and the structure of
the transaction.

A lender may request financial statements, tax returns, property information,
appraisal reports, environmental reports, purchase agreements, borrower
information and evidence supporting the hotel’s historical performance.

For general information about Canadian business acquisition financing, see

BDC Business Purchase or Transfer Financing
.

Location Matters When Buying a Motel in Ontario

Location is an important part of hospitality performance. However, buyers
should look beyond population alone and understand what actually generates
room demand in the local market.

Demand generators can include tourism, highways, hospitals, industrial
employment, construction projects, colleges and universities, airports,
government activity, sports facilities, major employers and seasonal
attractions.

Highway and Roadside Motels

For highway-oriented properties, buyers should evaluate road visibility,
directional access, signage, parking, proximity to restaurants and fuel,
commercial vehicle access where appropriate and competition along the travel
corridor.

Tourism Markets

Tourism-oriented properties may experience significant seasonal variation.
Therefore, annual financial statements should be supplemented with monthly
occupancy and revenue information wherever possible.

Urban and Employment Markets

Motels located within larger urban markets may generate demand from business
travel, construction, relocation, medical travel, events and other sources in
addition to traditional tourism.

Motel Properties for Sale Across Ontario

Buyers search for motels for sale in Ontario across a wide
range of communities, from major urban markets and tourism destinations to
highway corridors and smaller communities.

Opportunities may become available in Toronto, Brampton, Mississauga,
Hamilton, Niagara Falls, London, Windsor, Ottawa, Kingston, Belleville,
Peterborough, Barrie, Muskoka, Sudbury, North Bay, Sault Ste. Marie,
Thunder Bay and other Ontario markets.

However, buyers should not evaluate a property solely by city or asking price.
A smaller motel in a strong highway, employment or tourism location can have
a very different operating profile from a larger property in another market.

Motel Acquisition Due Diligence Checklist

• Land and building ownership
• Legal room count and room configuration
• Historical occupancy
• Average daily room rate
• Revenue per available room
• Monthly and annual room revenue
• Financial statements and tax information
• Booking and reservation reports
• Online travel agency commissions
• Payroll and staffing
• Utility expenses
• Property taxes and insurance
• Furniture, fixtures and equipment
• Major building systems
• Roof and building envelope
• HVAC and hot-water equipment
• Parking and site circulation
• Municipal water and sewer or private servicing
• Zoning and permitted use
• Environmental history
• Franchise or branding agreements where applicable
• Renovation and capital improvement requirements
• Financing and appraisal requirements

Frequently Asked Questions About Motels for Sale in Ontario