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Hospitality and food and beverage business buyers banking on tourism

Tags: Commercial

Confidence in New Zealand’s tourism sector growth is underpinning business sales in key hotspots around the country says the head of Bayleys’ tourism and business sales division, Paul Dixon.

“This year we’ve sold two very high-profile restaurant businesses – one in Auckland and the other in Queenstown - with both purchasers referencing growth in tourism and major events in their decision to buy,” says Mr Dixon.

“Selling two iconic business at opposite ends of the country in such a short period of time is not only a coup for Bayleys, but we’re also noticing it’s a strong motivating factor for other operators who want to get in on a slice of the tourism boom action.”

Dixon says the businesses - Oyster and Chop in Auckland’s Viaduct precinct and Pier 19 on Queenstown’s Steamer Wharf - represent the very best quality for both product and location, and the new owners seized on that.

Oyster and Chop purchaser Mike Opperman who owns several other restaurants, took possession of the business just before the recent British and Irish Lions rugby tour, and says the decision paid off financially.

“We had a couple of weeks of amazing trading out of the Lions tour,” Mr Opperman said.

“Although the underlying appeal of this business is its fantastic Viaduct location, the booming tourism landscape around Auckland does contribute to the fundamentals sustaining the decision to make these sorts of acquisitions.

“The venue’s strategic location directly benefits from tourist activity. That’s linked to the increasing numbers of cruise ship tying up at Prince’s Wharf just around the corner, the growing number of four and five-star hotels coming online in the immediate vicinity, and a longer outlook at how events like the America’s Cup will benefit businesses like ours in downtown Auckland.”

Tourism New Zealand figures for the year ended June 2017 show Auckland was responsible for nearly 30 percent of the entire national tourist spend.

Opperman says all these factors influence the big picture when making these type of business purchases.

In an 18-month period prior to its sale, Oyster & Chop grew its revenue to more than $6.2 million, and outperformed all expectations - up on average 20 percent year on year. The business is forecast to turnover $7 million in the 2017/2018 year.

It was a similarly appealing scenario for the purchasers of Queenstown’s Pier 19. Foot traffic boarding the adjacent TSS Earnslaw lake cruising ship is 300,000 passengers each way every year - acting as a magnet in attracting tourists to Steamer Wharf.

Bayleys tourism and business salesperson Carolyn Hanson, says Pier 19 enjoys exceptional summer trading, along with virtually strong trade all year round.

“The summer period accounts for more than 60percent of the business’s annual turnover. Winter and spring has shown solid growth over the last two seasons. The future is very promising. At five percent compounding growth turnover, revenue will hit more than $5 million in under five years without any price increases.

“The secret of Queenstown is well and truly out. Queenstown Airport is the fastest growing airport in Australasia, and there is over $2 billion in construction happening at present in the Wakatipu basin,” says Ms Hanson.

On a national scale, there were 3.34 million visitor arrivals to New Zealand in the year ended July 2016, the highest ever annual total - 11.2 percent higher than the previous year. The total spend by international visitors also increased by 17.7percent to $10.28 billion over the same timeframe.

Mr Dixon says the market is unique in that it is not only attracting new operators and buyers looking for businesses to cater for and benefit from the expected growth in tourism, but is also providing the ideal platform for existing owners to cash up.

“Many tourism related businesses have now enjoyed a few good years off the back of very difficult times during the Global Financial Crisis. With businesses now realising their potential, owners are taking the opportunity to either cash up and retire or move onto their next venture,” he said.

“Some businesses are now selling for three times their profit earnings. That’s a ratio owners weren’t able to get three or four years ago. As a result, Bayleys has a great range of tourism-related businesses on our books along with an increasing database of potential buyers.”

Mr Dixon says all signs point to continuing solid tourism related growth in both Auckland and Queenstown, especially with Tourism New Zealand’s latest 2017 figures confirming a 10percent year on year increase in the number of international arrivals over the last two years.

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