Investors expect domestic tourism to return to positive figures in the third quarter of 2022, with overall growth anticipated in 2023, according to Colliers 2022 Hotels Investment Review.

Colliers found that investor sentiment weighted 29.5% in favour of positive trading by comparison to quarter four in 2019.

Colliers National Director of Hotels, Karen Wales, said that while the Omicron has dented performance in the first quarter of this year, confidence and hotel bookings should trend upwards in the second half as vaccination rates increase.

“We expect a similar level of deal flow in 2022 as seen in 2021,” Wales said.

“The emergence of the Omicron variant will just bring forward case numbers and drive increased triple vaccination levels, so while there is short term pain expected in Q1, it should help confidence to build in Q2 and beyond.

“A tsunami of pent-up demand for corporate and leisure travel has the potential to drive above average near term returns before growth normalises to the levels which were evident pre-pandemic, but with a greater proportion of global travel pushed to perceived ‘safe’ destinations like Australia.”

Impressive trading in 2021

Colliers data shows Australia’s hotel market increased trading significantly in 2021.

Despite the disruption caused by lockdowns and border closures in 2021, transaction volumes finished well above the long-term average of $1.6 billion. A total of $2.87 billion worth of assets traded across 60 deals in 2021, up 197.5% on 2020, making it the second highest year on record in terms of total volumes sold.

This was helped by an increase in cross-border business, rising consumer confidence as vaccination rates increased, and corporates and investors transitioning to a ‘living with COVID’ mindset.

Excluding hotels which were bought for conversion, the average price per transaction reflected a 99.5% increase on 2020 at $325,000 per room.

Investment capital was predominantly domestic, a marked shift from the past decade, accounting for 55.8% of total transaction volume.

Colliers Head of Hotels, Gus Moors, is confident that Australia’s investment market will continue to ramp up in 2022.

“The opportunity to invest in previously tightly held key capitals is also expected to garner significant interest as the sector recovers and Australians start to explore again,” Moors said.