Hotel investment volumes in Australia reached AU$2.43 billion in 2023, showcasing a year-on-year increase of 26% and surpassing the 10-year long-term average of AU$2.14 billion, according to the latest data from JLL Hotels and Hospitality Group.
A total of 53 deals settling over the year, encompassing approximately 5,500 rooms, demonstrating robust activity and exceeding the previous year’s 51 sales (4,100 rooms) to became the highest number of transactions reported annually since 2015’s record breaking 57 deals (10,600 rooms).
The three Eastern Seaboard states came out on top, representing nearly three-quarters (74%) of the overall volumes. New South Wales led with 32% of total volumes or AU$779 million, primarily due to the forward-funding of the Waldorf Astoria Sydney development project. Queensland (23% – A$564 m) and Victoria (19% – A$461 m) followed with most city markets witnessing positive year-on-year increases in investment volumes.
“Queensland was arguably the standout performer of any state over 2023, recording its largest annual transaction volume since 2015 (A$742m),” said JLL Hotels and Hospitality Group Executive Vice President, Investment Sales and Head of Hotel Debt Advisory, Adam Bury.
“This was driven by both strong domestic and offshore interest, a market leading trading recovery over the past two years, and the significant investment going into the state’s South East in the lead up to the Olympic Games.
“Further, buyer interest covered many of the capital cities including significant transactions in Sydney, Melbourne, Brisbane, Gold Coast and Adelaide, showing the depth and breadth of investor demand within the market.”
Domestic buyers and local capital continued to dominate, making up 79% (approximately AU$1.93 billion) of total investment volumes, however JLL stated that many of these investors have offshore limited partners.
Direct offshore investment contributed 21% of total investment volumes (approximately AU$500 million), primarily from groups out of Singapore such as Invictus Developments, City Developments Limited (CDL), and Worldwide Hotels Group.
JLL settled five of the market’s final deals for 2023 including the largest ever recorded single asset transaction on the Gold Coast, the Sheraton Grand Mirage at AU$192 million. This was followed by New South Wales deals, Vali Byron Bay at AU$29.1 million and Angourie Resort at AU$25 million; Mercure Kawana Waters at AU$21.3 million in Queensland; and in Western Australia, the Seasons of Perth at AU$22.5 million.
“The Australian Hotel Market continues to showcase immense resilience and attractiveness to investors, supported by improved liquidity and robust trading growth,” said JLL Hotels and Hospitality Group Managing Director and Head of Investment Sales Australasia, Peter Harper.
“Importantly, the market continues to attract significant interest from global investors, particularly from groups out of Asia, who are looking to deploy capital in key markets with strong fundamentals. The continued growth of domestic investors, both from established groups and new entrants to the sector is highly encouraging, with the majority of this capital being attributed to privates, investment funds and developers.
“Anticipating the upcoming year, there is a prevailing cautious optimism that a more certain underwriting environment and favourable trading conditions will sustain investor interest throughout 2024.
“The strongest interest will remain on aspirational assets, be that emotive or strategic, as well as properties that offer genuine upside through refurbishment and repositioning. Likewise, hotels that lend themselves to the bullish living sector through adaptive use or redevelopment will also remain in the spotlight.
“This sentiment is particularly evident in major city markets, which are expected to benefit from ever-evolving events calendars and a continued recovery in both international and corporate/MICE demand. We expect the flexible nature of pricing in hotel operations to continue to offer a hedge against inflation, and continue to enhance the attractiveness of our sector.”