Hotels enjoying ‘strong cash flow’ and development upside

Hotels enjoying ‘strong cash flow’ and development upside

9 March 2018

New hotel development deals in Australia totalled $394 million, almost a quarter of the total sales volume in 2017, notes Colliers International’s latest Australia’s Hotel Sales report.

For the year to December 2017, 47 hotels changed hands in Australia for a combined sales total of $2.02 billion.

The largest transaction of the year was in Melbourne, with the $230 million purchase of the Hilton Melbourne South Wharf.

Yet, the report also found that hotel sales volumes eased, following three of the strongest years on record.

“2018 is likely to see similar patterns to 2017, with limited opportunities in Sydney and Melbourne, as owners in those markets continue to enjoy strong cashflow,” said Colliers International Australia Head of Hotels Gus Moors.

Managing Director of Savills Hotels, Michael Simpson, said the peak of transaction sales set in CY 2015, there had been a precipitous decline in the total dollar value of hotels transacted across Australia.

“Many owners seem to be opting to hold their hotels for fear of being cashed up without the ability to re-enter the market; which is becoming a self-fulfilling prophecy,” Michael Simpson said, following the release of Savills February 2018 Hotels Market report.

Both Colliers and Savills note the limited level of existing inventory on offer is pushing investors into the development and turnkey space.

Recent developments in the hotel market include the following:

  • Dexus Property Group and Perth billionaire Stan Perron have received approval from the City of Sydney for a hotel project with an estimated cost of $426 million at 201-217 Elizabeth Street in Sydney’s CBD. A permit has been granted for a 50-storey mixed-use building providing hotel, retail and residential uses, with basement parking and a pedestrian connection to Museum Station and potential connection to the future Pitt Street North Metro Station.—The Urban Developer.


  • Responding to runaway demand, Melbourne Airport will build a new 464-room hotel, creating the first new hotel accommodation on its doorstep since 2002. The super fund-owned airport has signed an agreement with operator Accor to manage the seven-storey, L-shaped hotel that will offer two different brands—a three-star Ibis Styles and four-star Novotel—in two towers that share back-of-house facilities.—AFR.


  • One of Melbourne’s best development sites, the Novotel St Kilda hotel overlooking Port Phillip Bay has hit the market with a price tag of around $100 million. Standing on more than half a hectare, the hotel is being sold by the Barana Group, who acquired the hotel in 2012 for around $55 million and later secured a permit for 25,581sq m of residential space over a three-tower, seven-storey apartment project.—The Urban Developer.


  • Middle Eastern airline Qatar Airways has purchased the landmark Sheraton Melbourne for about $135 million. The airline had been chasing a berth in the Australian hotel sector for some years as it looked to become a hotel owner in key destinations, including the Victorian capital. The 174-room hotel is located at the “Paris end” of Little Collins Street, near the city’s celebrated laneways that house leading shops, restaurants and the city’s main theatres.—The Australian.


  • Sydney-based Veriu hotel chain has continued its expansion with the acquisition of 13 hotels from the Punthill Apartment Hotel Group. The portfolio includes eight suburban and four CBD apartment hotels in Melbourne and one in Brisbane, offering 777 apartments in total.—The Urban Developer.


  • Sydney’s affluent lower north shore’s Mosman is set to get its first new luxury hotel after boutique hotel group Emerald City obtained development approval to build the 26-room luxury hotel, The Albert, at Cowles Road.—AFR.


  • Twin towers housing more than 500 apartments and 280 hotel rooms have been approved by the Gold Coast City Council for Surfers Paradise. Chinese developer Sunnyland Group acquired the site at 2-20 River Terrace in June 2017 for $17.6 million – the twelfth time the site has changed hands since 2001 where it was acquired for $390,000.—The Australian.


  • European hotel giant Accor has sold a 55 per cent stake in its hotel investment platform AccorInvest to some of the world’s biggest sovereign wealth funds and institutional investors for €4.4 billion ($6.9 billion). The investment platform comprises 891 owned or leased hotels including 24 hotels in Australia ranging from economy to midscale. Among these 24 are a portfolio of 15 Ibis and Ibis Budget hotels that Accor bought from the Abu Dhabi Investment Authority for $200 million in December 2016.—AFR.


Sydney continues to lead the Australian hotel market in terms of revenue per available room, with a sizable lead of more than $40 per room over Melbourne.