At times the market is a slow-moving beast, like a bus trying to complete a U turn. Other times it moves faster than Usain Bolt in the 100m sprint. Why is this?
Human sentiment is ultimately the answer. But what affects human sentiment enough to change such huge things as global markets in minutes? Events that occur nationally and internationally play a significant role of course. Economic factors and obviously health factors are just two things that create changes in market sentiment and how people change their behaviour overnight (or much faster in some cases).
The relevance to the markets we generally work or live within is what is of interest to most. One day things are quiet with limited activity and the next day without really seeing it coming, the phone is ringing off the hook. This can be the case for most businesses, no matter what business one is in. I am often asked the question of how long it takes to sell a business, in particular motels and caravan parks? The answer can be completely different from one month to the next depending on the market and how it is performing at that moment.
Economics shows us that the demand for any product goes up, and consequently, must come down. One cannot exist without the other. Human sentiment and feeling about a particular matter or situation can change the course of activity almost in an instant.
The simplest example of this is the share market. It can change in less than a minute from trending down to a complete upward spike on the back of one public announcement. It relies on the sentiment of investors for the gains or losses that are experienced every day. Good news equates to gains and bad news to losses. The change can be by the minute from one end of the spectrum to the other. Reserve bank announcements or commentary to a new US President being elected.
Since the outbreak of COVID-19 around the world in late 2019 and early 2020, markets of all types have expected highs and lows. The Australian All Ordinaries at the time of writing, is currently trading above 7300 points. The market has had its ups and downs during this time but has made more gains than losses overall and as a result sits where it is at the moment.
The residential real estate market reduced to next to nothing during the initial lockdown period has now bounced back to very strong levels not seen for a number of years. There is a six month wait to purchase a new recreational boat. The values of used cars have reportedly increased, again, all based on market sentiment. Without demand increasing, the prices and values cannot increase. The driving force is the demand for anything, creating or fuelling a market for it.
That brings us to the accommodation industry and in particular, the market for motels and caravan parks, and where to from here…
Early 2020 included the lockdown period and the sale of many business for much of the year was a non-event. There were the odd transactions that occurred, but very limited numbers. Those previously in the market were telling us they were going to sit tight for a while and just wait to see how things played out. The end of the year did start to throw up some green shoots and November was starting to indicate that the new year would kick off with a flurry very quickly. This ended up being the case early on, but then activity started to drop off in February. The ups and downs of negative news reports and state dictated snap lockdowns helped to thwart any momentum that the market started to muster. Again, the ups and downs in change of sentiment based on exterior factors.
At the time of writing, the motel and caravan park markets have now been able to gain some good traction and buyer demand is returning quite strongly. At this point, I can say that the immediate future looks good and the balance of 2021 very positive. Over the long term the market for accommodation businesses goes hand in hand with how the industry is performing. Based on strong trading performances and high demand for accommodation for most (but not all) regions, the future value of motels and caravan parks throughout Queensland seems very bright going forward.