I have always been in tourism-related industries, starting in ‘The Shaky Isles’ in many roles from ski field operations to managing the world-famous Milford Track.

Moving to Australia in the early 1980s, I continued in hotel management roles for several groups, then co-founded a company that specialised in turning around distressed hotels. This included taking over management rights across Queensland and reversing their fortunes.

I joined Resort Brokers in 2005. My region predominately covers the Sunshine Coast, however I have been involved in sales of both management rights and freehold branded hotels throughout Australia.

I have sold many of the region’s landmark management rights, often two or three times over. I focus on boutique and high-end businesses and specialise in operations that have additional components such as restaurants, day spas and conference facilities.

How did you get into the Management Rights sales industry?

You could say it started with an off-hand quip. I happened to mention to one of the Resort Brokers agents at the time that "I should come and work with you." The next day, I was interviewed by the then Sunshine Coast manager and, as they say, the rest is history.

What are some of your career highlights from your time in the industry?

• Selling the management rights to Soul Surfers Paradise to Mantra Group for what was then a record price of $25.7M,
• The sale of a 64-unit freehold hotel in Perth WA to a Singaporean investor,
• Selling two iconic Hastings Street, Noosa Beach management rights with the combined value of close to $10M,
• The sale of the 128-unit Oceans Resort & Spa Hervey Bay to Minor Hotel Group (Oaks),
• Having sold more than 200 management rights with a combined value exceeding a quarter of a billion dollars.

What are the biggest issues facing the Management Rights sector in Australia?

The biggest issue, in a word, is funding. As the banking Royal Commission gained scalps, seemingly on a weekly basis, funding became harder to obtain as they applied increasing scrutiny to borrowers.

The inescapable outcome is that 70 per cent gearing, especially for smaller management rights, is becoming extremely difficult to obtain. Unless the buyer has substantial external income (one partner works outside the business, for example), I think the more likely gearing ratio will be 60 to 65 per cent maximum. The obvious temptation for some buyers will be to take their available equity and buy a bigger business where 70 per cent gearing might be available, rather than put more into the deposit for a lower net profit and a lower return.

Ultimately, I suspect this is all about price. All things being equal, every building has a debt level it can sustain. That might be 70 per cent gearing, it might be 50 per cent. The important thing for vendors to understand is where their building sits and what that might mean for price and demand.

Another issue relates to the quality of accommodation. We are starting to see a lot of older management rights complexes falling behind in the quality of offerings they are promoting to the market.

This topic was at the forefront of presentations by key industry professionals at the recent ‘Refresh’ conference run by Tourism Noosa. I believe it’s critical for all management rights operators to start thinking about what their product is looking like and how long before guests start looking elsewhere at newer or upgraded accommodation options. Or worse still, at different destinations.

What trends do you expect will emerge within the next decade?

We are seeing a strong and growing appetite from experienced operators in the management rights industry, especially from the branded operators. There have been several new players, equity groups and syndicates emerging, which will make it more difficult for the traditional ‘mum and dad’ operators to gain a foothold in the high net, high profile sector of the market.

This will continue to drive value at the top end of the market. There has been a trend on the Sunshine Coast where major developers have retained their rights, which has had a general impact on the supply of quality stock.

What changes would you like to see over the next two to five years in the industry?

I would like to see the Queensland Government take the necessary steps to change the Powers of Attorney Act to rectify the issues causes by the Gallery Vie decision.

This all had to do with a case in 2015 where a bank tried to assert their right to take back a business that was in receivership and on sell it. A decision of QCAT in Vie Management ([2015] QCAT 164) determined that the current clause in most management rights agreements effectively meant the bank was unable to obtain security over the asset. This has caused concerns for financiers as there is the potential for their security over the agreements/management rights business to be thwarted.

The majority of financiers in the industry are requiring agreements to be amended to limit the Body Corporate’s ability to terminate them for insolvency-related events of default that occur while the Manager is in receivership. This protects the financier’s security by preventing the Body Corporate from terminating the Agreements if an insolvency-related event of default occurs while the Manager is in receivership.

Essentially, the incoming manager’s financier will only agree to fund the acquisition if the owners agree to vary the agreements to deal with ‘Gallery Vie’.

Finally, I would like to see the ACCC ban the rate parity clauses imposed by online travel agencies on accommodation providers. The ACCC is finally now looking into legislation banning OTAs from contractually demanding that operators do not offer lower prices on their own websites.

This contradicts the fact that, in 2016, the ACCC ruled accommodation operators could offer lower prices over the phone or in person, but that OTAs were entitled to expect rate parity online.

Online booking sites currently take around 80 per cent of all Australian hotel bookings, with US-owned companies Expedia (including Hotels.com, Wotif.com and Trivago) and Priceline (Booking.com, HotelsCombined.com and Kayak) controlling some 85 per cent of all online hotel bookings.

What is your favourite hotel and holiday destination?

Too many to choose from. Favourite hotels include Hotel G in San Francisco, Niramaya in Port Douglas and The Billi in Broome. Favourite destinations - the Napa Valley in California, Lake Wanaka in New Zealand and Bali.

See also:

Get to know Tim Crooks of Resort Brokers Australia

Get to know Alex Cook, Senior Broker at Resort Brokers Australia

Get to know Trudy Crooks, National Sales Manager of Resort Brokers Australia