CBD hotels around Australia can expect a return to pre-COVID trading and occupation levels in three to five years as international travel fires back to life, according to CBRE Hotels’ Hotel Outlook Report, released this week.
The pandemic-induced halt to global travel has hit hotel owners hard, leading to a wave of real estate sales for conversions from hotels to residential and built-to-rent projects.
The company’s latest Hotel Market Outlook, drawing on research up to the end of October 2021, suggested while sales have hit a five year high to AUD$2 billion in the past year-to-date, owners who have weathered the storm will be rewarded for their persistence as corporate travel and pent-up demand for leisure tourism will begin to rebound from early 2022.
CBRE Hotels’ Managing Director, Capital Markets, Michael Simpson, said he predicted now that restricted international travel has recommenced, reciprocal travel bubbles will lead to increased visitation levels which will in turn lead to normalisation on travel routes and activity.
“While the RevPAR growth trajectory stalled in Australia after a promising start in H1 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,” Simpson said.
Major hotel transactions reported for the year include the sale of 11 hotels operated under the Travelodge brand, with Salter Brothers picking up the portfolio in July from Mirvac and NRMA for AUD$620 million, in partnership with Singaporean sovereign wealth fund, GIC, and private investment vehicle, Partners Group.
Hotel sales earmarked for conversion to other uses include Melbourne’s Bayview on the Park to commercial premises along with Vibe Rushcutters Bay in Sydney, which will become a residential precinct. The sale of the InterContinental Sydney Double Bay for a combined hotel and residential project was also noteworthy, CBRE said.
CBRE Hotels’ Regional Director, Valuation & Advisory Services, Troy Craig, said close to one-fifth of the 2021 sales by value had been to buyers planning conversions.
“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,” 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.”