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Investors flocking to Australian hotels en masse

Hotel investors are flocking to Australia, according to new research.

Strong economic performance, property values and the overall tourism industry has positioned Australia among the world’s most desired markets for new investors, according to new research from global commercial real estate firm Colliers International.

Interestingly, the research showed other key determining factors generating interest for investors included governance and stability, indicating the strong likelihood it was written prior to last week’s Prime Ministerial change in Canberra.

Regardless, as Australia’s tourism industry continues to defy trends and show ongoing robust growth, hotel investors were taking notice. Colliers’ Capital Markets Hotel Investment highlighted an increase in deals being done, with $35 million in transaction concluded in the financial year ending 30 June 2018, up from the 30 completed the year before.

The study estimated Australia had a weighted hotel room pipeline of around 27,000 new hotel rooms across the country, with around half of these currently under construction and 7,000 proposed. New openings are expected to peak in 2019 and 2020 across all major cities except for Darwin and the Gold Coast. Conversely, the strongest performers were Hobart, Melbourne, Adelaide and Perth, with developments underway expected to increase supply by more than one-third once all are open for business.

The success of Australia’s hotel investment market was also driven by factors such as population growth, the size and scale of infrastructure projects, increasing urbanisation, expanding cities and the demands for new hotel developments, the Colliers report found.

Only $7 million dollars separated Australia’s three biggest states in terms of transactions closed. New South Wales led the way with $350 million, followed closely by Queensland at $347 million and Victoria only just behind at $343 million worth of deals.

Colliers International’s Head of Hotels, Gus Moors, said capital restrictions placed on Mainland China were impacting investment levels but were allowing the rest of Asia to catch up.

“This trend is likely to continue, with South East Asian investors dominating the offshore investment landscape driven by renewed interest in diversification, both in terms of location and product.

“Offshore groups continue to take a lead role in the development of new accommodation rooms, accounting for 40% of rooms opening in FYE2018 and almost two thirds of rooms currently in the pipeline, Moors added.

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