Lower currency a boost for Australian hotel market
Lower currency a boost for Australian hotel market
4 May 2016
Buyer appetite remains at a high level with $500m in deals in Q1
Sydney, 4 May 2016 – Continued improvements are forecast for the Australian hotel sector in 2016 despite a recent strengthening in the Australian dollar, according to new CBRE research.
The firm’s Q1 Australia Hotels MarketView report tips that appetite for domestic travel will remain firm and that the higher dollar will not be enough of a dampener to discourage overseas visitors travelling to Australia.
CBRE Hotels’ research manager Benjamin Martin-Henry said Cairns and the Gold Coast were expected to remain the star performers of the Australian hotel market after recording double digit increases in RevPAR for the year to March 31, 2016.
Growth in revenue per available room (RevPar) was 15.3% for Cairns and 11.3% for the Gold Coast in the year to March as a result of record international and domestic travel numbers.
However, the report highlights that growth has not been registered in all major markets, with an increasing divergence between the performance between the resource impacted cities of Perth and Darwin, the major business hubs of Sydney and Melbourne, and the outperforming hospitality markets in Queensland.
“The mining hubs of Perth and Darwin continue to suffer from the downturn, with Darwin being particularly hard hit due to increased supply levels,” Mr Martin-Henry said.
“Melbourne is in a state of transition, with occupancy rates increasing but average daily rates (ADR) having fallen, resulting in a drop in RevPAR. Sydney is also in a period of transition, with a slight decrease in occupancy results, although this is likely to be temporary as visitor demand remains strong.”
CBRE’s MarketView report also highlights that Canberra and Hobart have started the year on a positive note, with Hobart benefitting from substantial increases in tourist numbers.
However, the country’s key leisure markets in Queensland have been the real standouts.
“The Gold Coast and Cairns continue to outperform the rest of the country, posting the highest RevPAR growth rates for any major markets. This is consistent with CBRE Research’s view at the start of the year that these two leisure destinations would see the highest growth rates in Australia in 2016,” Mr Martin- Henry said.
CBRE Hotels Negotiator Hayley Manvell added that with a lack of new accommodation coming onto the market in both Cairns and the Gold Coast, demand was expected to outstrip supply in the short to medium term.
“Investors are likely to be keeping a close eye on these markets and will look to pick up any assets that come up for sale and benefit from the growth in these regions,” Ms Manvell said.
CBRE’s Q1 MarketView highlights that overall transaction volumes in 2015 surpassed expectations – and this momentum has carried into 2016 with close to $500m in hotel transactions occurring across Australia in Q1.
This included the $90m purchase of the Vibe Hotel, Sydney, by Singapore’s Far East Organisation and the $58m purchase of the Crowne Plaza Terrigal on the NSW Central Coast by a venture between the Laundy and Karedis families.
CBRE National Director Wayne Bunz said it remained to be seen whether the slowdown in the Chinese economy and recent gains in the Australian dollar would impact overseas buyer interest.
However, he noted that CBRE’s latest Asia Pacific Investor Intentions survey had shown that investors were more likely than ever before to purchase hotel assets.
“In our 2015 Investors Intentions survey, just 1% of investors indicated they would be purchasing hotel assets that year. Fast forward 12 months and that interest has jumped to 14%, with hotels now ranking as the third most sought after asset class behind office and logistics,” Mr Bunz said.
“One of the ongoing constraints will be the lack of purchasable stock and, with high levels of competition pushing up already high prices in Sydney and Melbourne, investors are expected to increasingly focus on opportunities in regional areas.”
Mr Bunz added that investors still perceived the Australian hotel sector to be a long term growth play and this was underpinning buyers’ willingness to pay premiums to secure high quality assets.
“This is compressing investment yields further, with this trend set to continue over the remainder of 2016,” Mr Bunz said.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.