Why Motel Numbers Have Stagnated Despite Population Growth

Australia’s population has boomed over the past few decades, surging from around 15 million in 1995 to over 26 million by 2025—a 73% increase in just 30 years. You’d expect this growth to fuel a corresponding rise in accommodation options, particularly motels, which have historically served as affordable, convenient stays for travelers and workers alike. Yet, the number of motels across the country hasn’t materially increased in that time. The neon-lit roadside staples remain a familiar sight, but new ones are few and far between. Why? The answer lies in economics: the soaring costs of land and construction have made building new motels a tough financial proposition, often dwarfing the cost of buying an existing one.

The Population Boom vs. Motel Stagnation

Since the mid-1990s, Australia’s population growth has been driven by immigration, urban expansion, and a steady birth rate. Cities like Sydney, Melbourne, and Brisbane have sprawled outward, while regional hubs have swelled with new residents and industries. Logic suggests this should have sparked a motel-building frenzy—more people means more travelers, right? Yet, data tells a different story. While exact historical figures on motel numbers are patchy, industry reports and anecdotal evidence suggest the total has hovered around 2,000-3,000 establishments for decades, with little net growth. Contrast this with hotels and short-term rentals, which have proliferated, and the motel’s stagnation stands out.

The Cost Barrier: Land and Construction

The primary culprit is the escalating cost of developing a new motel. Let’s break it down with some numbers. Building a modest 20-room motel today involves two big expenses: land acquisition and construction.

According to the Urban Development Institute of Australia’s (UDIA) 2023 State of the Land report, the national median lot price hit $391,546 in 2022, with Sydney topping out at $716,381 per lot. For a motel needing, say, half an acre (about 2,000 square meters), land costs alone could easily exceed $1 million in a regional hub or $2-3 million closer to a capital city, assuming multiple lots or a larger parcel.

Then there’s construction. CoreLogic’s Cordell Construction Cost Index (CCCI) shows residential construction costs have climbed 30.8% since the onset of COVID-19, with motel-specific estimates aligning closer to commercial rates. Industry benchmarks suggest building a basic motel costs $150-$200 per square foot in 2025 dollars. For a 20-room motel averaging 300 square feet per room (including common areas), that’s about 6,000 square feet total, or $900,000-$1.2 million in construction costs alone. Add in site preparation, permits, and contingencies—another $200,000-$300,000—and the total price tag for a new build lands between $2.1 million and $4.5 million, depending on location and specs.

Buying Existing Motels: The Cheaper Alternative

Now compare that to buying an existing motel. Real estate listings in 2025 show operational 20-room motels in regional Australia—think Tamworth or Mildura—selling for $1.5 million to $2.5 million, often including land, buildings, and a ready-made business. In pricier areas like the NSW Central Coast or Queensland’s Sunshine Coast, prices might creep toward $3 million, but they still undercut the upper end of new development costs. These properties come with established occupancy rates, existing infrastructure, and no construction delays, making them a far less risky investment.

For example, a 2023 sale reported by AccomNews pegged a 25-room motel in regional Victoria at $2.1 million, while a new build of similar size in the same area was estimated at $3.8 million by local developers. That’s a $1.7 million gap—money that could cover renovations, marketing, or a healthy profit margin instead of sinking into raw land and concrete.

Why the Costs Keep Rising

Land prices have outpaced inflation for decades, especially near growing population centers. The UDIA notes Sydney’s median lot price jumped 31% in 2022 alone, driven by demand and limited supply. Regional areas aren’t immune either—greenfield sites in places like Toowoomba or Bendigo have doubled in price since the early 2000s. Construction costs, meanwhile, have been hammered by global supply chain issues, labor shortages, and material price hikes. Timber, steel, and concrete—all motel essentials—saw double-digit increases post-pandemic, and while growth has slowed (3.4% annually per the CCCI in 2024), costs remain elevated.

Add regulatory hurdles—council approvals, zoning restrictions, and environmental assessments—and the timeline for a new motel stretches to 18-36 months, with extra fees piling on. For a small operator or family business, the traditional motel-owning demographic, this is a daunting upfront burden.

The Economic Trade-Off

Faced with these numbers, investors and operators are making a rational choice: why build when you can buy? An existing motel offers immediate cash flow, bypassing the years of planning and building that a new site demands. Even accounting for renovation costs—say, $200,000-$500,000 to modernize an older property—it’s still cheaper and faster than starting from scratch. Plus, the risk is lower; a new build might flop if occupancy doesn’t meet projections, while an established motel has a track record to lean on.

This dynamic explains why motel numbers haven’t budged. Developers chasing higher returns pivot to apartments or boutique hotels, where profit margins justify the outlay.

The Future of Motels in Australia

Without a drastic drop in land or construction costs—unlikely given current trends—the motel count will likely stay flat or even decline as older properties age out or get repurposed.

Australia’s motel story is one of economic inertia. The population may have grown by millions, but the cost to build anew has grown faster, locking the industry in a 30-year time capsule. Until the numbers shift, those classic roadside signs will stay more memory than movement.