Investors hungry for hotels

Investors hungry for hotels

10 August 2017

CBRE Hotels reports that hotel deals hit a three-year-low of just $600 million in the first six months of the year, says the Australian Financial Review.

This was a 60 per cent fall from the $1.5 billion worth of hotels that changed hands in the first half of 2016 as investors struggled to find buying opportunities at the top end of town.

“Such is the tightly held nature of the hotel market in major hubs such as Sydney and Melbourne it is unsurprising that transaction volumes have been muted compared to previous years,” notes the CBRE report.

“Owners have been unwilling to part with prized asses despite a strong appetite from investors to further their hotel holds; a trend which is unlikely to change in the second half of the year.”

Hotels are also seen as attractive investments due to the current tourism boom in Australia, with record numbers of international and local visitors travelling throughout the country.

The biggest hotel deal of the year thus far saw Singapore’s UOL Group purchase the 396-room Hilton Melbourne South Wharf—since rebranded the Pan Pacific Melbourne—for $230 million.

The $230 million deal for the Hilton just pips Japanese investor Daisho’s $220 million off-the-plan acquisition last month of the 294-room W hotel at Cbus Property’s CollinsArch development.

The AFR also notes that AccorHotels will open Australia’s first dual-branded high-rise hotel in the Melbourne city centre in 2018, after striking a deal with Singapore’s Well Smart Group.

Spanning 36 levels and 483 rooms, the dual Novotel and ibis Melbourne Little Lonsdale Street hotels will be built at 399 Little Lonsdale Street, near the corner of Queen Street and close to Melbourne Central and Emporium Melbourne.

The ibis Melbourne Little Lonsdale Street will comprise the lower tier of the tower and encompass 270 premium economy guest rooms with the four-star Novotel situated above the shared public spaces in the middle and offering 213 guest rooms and suites.

These deals are the latest in the big push by Asian investors into Melbourne’s strongly performing CBD hotel market, where occupancy rates hover close to 90 per cent.

Hong Kong-based Swisse-Belhotel Group, which operates 140 hotels globally, is also looking to expand into Australia and may introduce its new two-star brand, Zest, to capture budget guests, reports The Australian.

Meanwhile in Sydney, hotel mogul Jerry Schwartz’s Impact Investment Group has paid $156 million for the yet to be completed Four Points by Sheraton at Central Park in Sydney.

The 4.5-star hotel forms part of the $2 billion Central Park development on Broadway Chippendale and will have 297 guest rooms when it opens 2018, says the AFR.

It is the 13th hotel acquired by Mr Schwartz and his seventh in Sydney. The acquisition comes just a few months before the grand opening of the five-star, 590-room Sofitel Sydney Darling Harbour, which he bought for $360 million in 2015.

Earlier this week, the AFR reported that Mantra Group, the country’s biggest listed hotel operator, had snapped up the Deague family’s Art Series hotel chain with over 1000 rooms for $52.5 million in one of the biggest portfolio acquisitions of the year.

The seven-strong boutique hotel chain includes some of Melbourne’s best-known suburban hotels, among them The Cullen in Prahran and The Olson in South Yarra as well as hotels in Adelaide and Brisbane, with each hotel inspired by a well-known Australian artist.

Another operational hotel to sell in Q2 was the Intercontinental Double Bay in Sydney, which reportedly sold for $140 million to Chinese investor Shanghai United RE.

According to CBRE, Canberra was the top performing hotel market over the year to June. RevPar (revenue per available room) increased 10.4 per cent following a 5.4 per cent rise in average daily rates and a 5.4 per cent increase in occupancy. Sydney was the other hotel market to post strong growth.