Regional Workforce Challenges – Impact on Going Concern Values

Expanding Regional Workforce Demand

This demand has increased occupancy and revenue across these sectors which, in the medium to longer term, creates significant variations in revenue and EBITDA analysis.

With the evolution of the fly-in-fly-out (FIFO) workforce beyond mining, oil and gas into industries like renewable energy infrastructure development, agricultural processing, and road and rail infrastructure development, regional areas are now experiencing a strong demand for accommodation and services.

In the absence of purpose-built accommodation facilities including privately owned camps and company housing, many existing assets such as motels, hotels/pubs, caravan parks and boarding houses are being utilised on a commercial basis, or in some cases purchased for specific industry use.

Over the past year, Acumentis has assessed various regional assets in Victoria and NSW, including caravan parks hosting meat works or fruit picking staff (including under the PALM scheme), motels occupied by or bought for accommodating food processing employees, traditional motels, boarding houses, and hotels/pubs housing infrastructure workers. Some caravan parks have also installed studio-style transportable accommodation for regional workers.

Analysing Revenue and EBITDA Variations

The potential increases in occupancy and revenue at regional facilities over project periods, sometimes at the expense of traditional tourist use, creates a challenge in analysing and suitably valuing many assets in this sector.

When analysing detailed operational accounts and data, it's crucial to consider the historical trading performance along with understating the drivers behind any significant peaks in revenue and occupancy due to a remote workforce. In terms of one-off projects like a large infrastructure development, understanding the duration of construction phases, worker demand pre, during and post construction, as well as the traditional use of the facility, and its ability to return to historical revenue levels or maintain current revenue levels, it critical for valuation. A sound knowledge of the often short-term impacts created by a mobile workforce and its related industry enables suitable adjustment of parameters, yields, and resulting values as necessary.

Moreover, seasonal occupation patterns, the impact on traditional tourist supply, and a return to traditional use, must also be considered.

Staffing Challenges and Operational Costs

Staffing challenges further complicate matters in regional going concern accommodation and hospitality businesses, particularly in areas experiencing increased demand or strong tourist influxes, where staff availability is limited by demographic factors or housing costs. This can result in significantly increased operational costs or limitations on business operations.

For instance, Alpine areas and nearby towns like Bright in Victoria's North East High Country, boasting significant tourist and event demand supported by numerous accommodation and food and beverage providers, face operational constraints and growth limitations. This difficulty arises from the inability to source adequate staff numbers due to the significant rise in real estate capital and rental values in the area. This issue is further highlighted by the struggle to find and accommodate staff to work in nearby Alpine resorts. To address this, a developer recently purchased the site sublessee's interest in a large former SEC village and an Alpine airport. This acquisition aims to establish staff housing facilities, allowing ongoing growth and development of local and neighbouring businesses.

Similarly, coastal tourist regions grapple with staffing issues tied to demographic and cost-of-living pressures.

The mobile workforce and regional staffing issues have been highlighted in market activity and analysis over the past twelve months. These factors will remain strong drivers and limitations across various asset types in regional areas. Addressing them requires a sound understanding of traditional methodologies alongside a consideration of the micro and macro factors related to individual asset types, regions and industries.

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