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Northern Ontario Lodge & Resort Sales Data

Knowing the price range that the majority of lodge and resort sales fall within is very beneficial to both current owners and interested buyers.

Most lodges and resorts are sold privately with owners establishing the asking price without professional consultation. My conversations with owners have revealed the asking price is generally based on 3 things: the amount the owner needs to retire, the price of cottages in the area and the asking price of other lodges and resorts on the market.

There are many problems with setting the asking price for a lodge or resort based on those three things.

Pricing Based on What is Needed to Retire

Pricing based on what is needed to retire doesn’t factor in the cost of alternative lodges and resorts that are for sale. Owners need to put themselves in the buyer’s shoes and ask themselves “what could a buyer afford to pay and still have a viable business based on the revenue the lodge or resort is currently generating?”

While sellers won’t know how their lodge’s revenue stacks up against the other lodges on the market, I guarantee the buyers out there do.

One of the first things buyers ask for when inquiring on a lodge for sale, is to see the financial statements. If they’re really serious about buying a lodge or resort in a specific area, the buyer probably knows more about the financial performance of lodges in the area than the seller does.

An asking price above what the business’ current income can support is often rationalized by what the business’ potential is. If there’s potential for increased income, a seller would be wise to do the work to bring it up to it’s full potential and then list it for sale. Asking a buyer to pay a price based on the business’ potential is like asking someone to pay the fully renovated price for a fixer-upper house, it just doesn’t work that way.

Pricing Based on Cottages in the Area

Pricing based on cottages in the area doesn’t factor in that lodges and resorts are a completely different real estate product.

Again, we must put ourselves in the buyer’s shoes. If I’m a cottage buyer, I likely have no desire for 10 guest cabins and I’d much rather have one really nice main cottage and maybe one guest cabin.

This is evident when we see a single cottage in the Sioux Narrows area of Lake of the Woods sell for $500,000 and then a resort nearby with a main lodge and 10 guest cabins sell for only $606,000.

It’s the same effect we see in the sale prices of waterfront land. Most people who want to buy a waterfront lot only want an acre or two. After those first few acres, they have no need or desire for any more than that and the price per acre drops significantly as the land size gets larger.

If you want full value for each cabin, the property must be subdivided or readily subdividable.

Pricing Based on Asking Prices of Other Lodges & Resorts on the Market

Pricing based on the asking price of other lodges and resorts on the market doesn’t factor in that most sell far below the asking price and sellers generally don’t know how their business’ financial performance compares.

I recently analyzed the asking price vs sale price ratio of lodges and resorts in this article. Nearly a third (29 of the 100 sales analyzed), sold for less than 77% of their asking price. This is clearly an unreliable metric to base such an important decision upon.

Asking and Purchase Prices Need to be Based Upon Relevant Market Data

Asking prices need to be based upon actual sale prices of lodges and resorts. The ideal comparables are:

Lodges and resorts are all very unique and finding recent sales that are similar in all of those categories isn’t possible. This is why valuing this type of real estate is very difficult. But, with enough sales data on hand you can develop a relatively narrow range that the sale price likely resides within.

Below are a whole bunch of Northern Ontario lodge and resort sales that will give buyers and sellers an idea of the approximate range that Northern Ontario lodges and resorts are selling for. I haven’t provided specific information in order to protect their privacy.

This article has been prepared by Frontier Hospitality Advisor for general information only. Frontier Hospitality Advisor makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Frontier Hospitality Advisor excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this article and excludes all liability for loss and damages arising there from.

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