- Despite a year of lockdowns and continuous travel restrictions, hotel sales in Australia have grown to almost $2 billion this year
- CBRE Hotels data shows that this figure is a five-year record and up from $681 million in 2020
- CBRE Hotels’ Tony Craig says over one-fifth of 2021 sales by value were made by purchasers considering conversions
- It is anticipated by CBRE that CBD hotel markets will return to 2019 performance levels in three to five years when lockdowns cease and foreign traffic resumes
Despite a year of lockdowns, restrictions and border closures, Australian hotel sales have risen to almost $2 billion this year, a five-year record and up from $681 million in 2020.
According to new CBRE Hotels data, activity has been fuelled by a wave of hotels sold for residential and build-to-rent conversions.
Also pushing the numbers up were major portfolio sales, such as the Tucker Box Hotel group’s $620 million sale of 11 Travelodge hotels and landmark single-asset transactions, such as last week’s $315 million sale of the Sofitel Wentworth Sydney.
According to CBRE Hotels’ regional director of valuation and advisory services Troy Craig, over one-fifth of 2021 sales by value have been to purchasers considering conversions, putting this year’s sales tally on track to be in line with historical trends.
“That’s quite remarkable given ongoing border closures, with activity being underpinned in part by purchasers looking at opportunities to reposition existing assets to capitalise on the strength in the residential market and rising interest in build-to-rent opportunities,” Mr Craig said.
“We’ve also seen offshore-backed capital continue to pursue hotel investment opportunities, which has led to prices per room being close to pre-COVID levels.”
The nationwide Tucker Box portfolio, which was bought by Singapore sovereign wealth fund GIC, Swiss private equity company Partners Group and Melbourne-based Bayview on the Park, was by far the largest transaction this year.
The other focus area has been conversions, as evidenced by the $70 million-plus sale of Melbourne’s Bayview of the Park to Aware Super, the $125 million sale of Vibe Rushcutters for a residential conversion, and the $178 million sale of the Intercontinental Hotel at Double Bay for a combined hotel and residential project.
CBRE Hotels managing director Michael Simpson said developers are capitalising on the strong residential market and the interest in build-to-rent developments to acquire “well located, fringe city hotels.”
Mr Simpson said those assets are likely to have a slower trajectory than CBD accommodation assets and “have a higher and better use as residential given their location.”
CBRE also anticipates that CBD hotel markets, according to a separate Hotel Outlook report, will return to 2019 performance levels in three to five years when lockdowns cease and foreign traffic resumes.
Mr Simpson said the revenue per available room (RevPAR) growth trajectory stalled in Australia after a promising start in the first half of 2021.
“This has provided reassurance that once the COVID shackles are removed pent up domestic demand will quickly translate into increased hotel occupancy, which will sustain and drive average daily room rates,” Mr Simpson said.
“Restricted international travel will recommence next month and will gradually increase as reciprocal travel bubbles are initially established, which will inevitably lead to normal international travel routes and activity.”