The Australian Hotel Market Continues to Attract Strong Levels of Foreign Capital

Colliers International's 2016/17 Capital Markets Investment Review reports that 13 Australian hotels sold to Chinese investors for a total of $1.12 billion.

Commercial property investment across the hotel, office, retail and industrial sectors remained buoyant in the 2016/2017 financial year, according to new reports from Colliers International.

The Australian hotel market continues to attract strong levels of foreign capital, led by buyers from Asia, but both domestic and international investors regard Australia as relatively low risk and a highly transparent market.

According to Colliers International’s 2016/17 Capital Markets Hotels Investment Review, capital was primarily sourced from China, with Chinese investors purchasing 13 hotels for a total of $1.12 billion.  The $439 million in domestic capital accounted for 14 per cent of total investment.

Key findings:

  • In FYE 2017, there were 41 Australian hotel transactions with a total value of over $3.05 billion
  • FYE 2016 had 66 transactions, but the total value was only $2.6 billion
  • New South Wales led sales volumes at around 42%
  • Victoria followed with 39% of sales volume
  • Captital in Australian hotel transactions in FYE 2017 was sourced from:
    – China ($1.12 billion)
    – Singapore ($820 million)
    – Australia ($439 million)
    – Hong Kong ($126 million)

The total hotel transaction volume in the FYE2017 for sales more than $5 million came to $3.05 billion, with most activity taking place in New South Wales (42 per cent), closely followed by Victoria (39 per cent).

“There is little doubt that Australian hotels are highly regarded,” Colliers International’s Head of Hotels, Gus Moors, said.

“Australia is benefiting from increased Asian inbound arrivals, as well as strong domestic demand, and we have started to see domestic and offshore capital enquiring on well-located regional or unique assets across New South Wales, Victoria and Queensland.

“As a result, we are seeing an increase in transactions occurring in areas outside of the capital cities and major resort markets.”

As outlined in the report, the Australian hotel sector has a long history of attracting offshore capital, particularly from Southeast Asian countries.

“During the past three years, this has been supplemented by the Chinese market, who are attracted by Australia’s stable economic performance, property cooling measures in their home markets, and our relatively high-yielding freehold assets,” Mr. Moors said.

Mr. Moors said opportunities to acquire established premium accommodation stock in the eastern seaboard capital cities was expected to remain limited throughout the coming year, which would fuel investor demand and compress yields even further.

“We anticipate that the performance of hotels in Sydney CBD will continue to be strong,” he said.

“With occupancy levels largely at their extremes, growth should be realised in Average Room Rates, and with very limited new supply entering the market, the opportunity for revenue retention and profitability are strong.

“We anticipate limited buying opportunities, however, as Sydney is likely to continue to be a tightly held market.

“Melbourne hotel performance levels remain strong, although they have not matched the year-on-year growth levels of Sydney. Brisbane and Perth will need to absorb incoming supply but do present some counter-cyclical buying opportunities.”

 

SOURCE: The Hotel Conversation
POSTED: August 28, 2017
@Jurds Real Estate – Cessnock and Hunter Valley Wine Country Property Experts – the place to buy, sell and lease property in Cessnock and the Hunter Region.

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The Australian Hotel Market Continues to Attract Strong Levels of Foreign Capital