Real estate experts at Colliers claim the future is bright for hotel investment in Australia with traditional property investors eyeing the over AU$2 billion in assets on the market – 75% of which were listed in Q3 2023.
“Hotels are emerging as a preferred property investment sector, as new market entrants are drawn to conditions of easing supply, high room rates and the return of international travel,” said Colliers Head of Hotel Transactions, Karen Wales.
“Since hotels differ from other commercial real estate assets, with many continuing to enjoy strong income growth amidst resurgent tourism markets, transaction volumes are expected to reach $2.5 billion by end of year.”
Sydney’s hotel market is the top performer nationally with occupancy above 75%, an average daily rate (ADR) above AU$300 and revenue per available room (RevPAR) above AU$200, according to STR and Colliers.
Brisbane – the only market in Australia where occupancies are trending higher than 2019 – is another top performer.
In addition to hosting the 2032 Olympics, Brisbane has achieved the highest RevPAR growth (50.9%) and ADR growth (50.2%) nationally over the year to September 2023 when compared to 2019, according to STR and Colliers.
Next year will see the staged opening of the Queens Wharf Brisbane from April 2024 with the introduction of three new hotels, The Star Grand, Dorsett Brisbane and Rosewood Brisbane.
“While the next couple of years will see a slowing in the hotel accommodation pipeline nationally, with 7,529 rooms expected to open between 2024-2027, compared to the 4,499 rooms which opened this year, Brisbane is emerging as a favoured hotel development hot spot as investors look to gain a foothold and capitalise on the decade of green and gold,” Wales said.
As luxury and upscale hotels continue to outperform all other classes with a national average occupancy level of 70% and room rate of AU$326, according to the Australian Accommodation Monitor, a number of luxury hotels are set to enter the market in 2024 and beyond including Marriott Adelaide, Mondrian Gold Coast, Shangri-La Melbourne and 1 Hotel Melbourne.
“While luxury resorts are performing strongly amid the resurgence of leisure travel and desire for experiences post pandemic, we expect capital values for the broader Australian hotels market to also remain competitive compared to global peers, as international travel and revenue defends against economic fluctuations,” Wales said.
Colliers says new market entrants are partnering with known hotel fund and asset managers to operate strategically in the face of numerous challenges including a 20% increase in hospitality wages since 2018, pressures to reduce carbon footprint and supply chain disruption.
“Hotels need to recalibrate their modus operandi now to adapt to a fundamentally different operating environment and successfully navigate the course to uncover hotel ‘alpha’ or ‘excess return,” said Colliers National Director of Hotel Asset Management, Neil Scanlan.
“Operators who don’t proactively align with the flight to quality, factoring in capital for asset upgrades and repositioning, while improving energy efficiency and overall operational costs, will find core issues can no longer be hidden behind the veil of strong surges in hotel room rates.”