Hotel investors are turning their sights on Australian leisure assets in order to capitalise on the current strength in the tourism sector.
The shift is highlighted by new figures from CBRE which show a pick-up in hotel investment activity in regional areas as purchasers seek alternative opportunities to corporate-style hotel investments in the major CBDs.
In 2015, circa $3.2 billion worth of Australian hotels were transacted, with 77% of these based in the CBD markets and only 23% located in regional areas.
Year to date, approximately $1.3 billion in deals have been finalised, with 69% based in the CBD and 31% in regional areas.
CBRE Hotels Regional Director Wayne Bunz said the figures highlighted that investors were turning their attention to leisure offerings as a result of both the current tourism boom and the tightly held nature of CBD markets.
The shift is even more apparent when analysing the sales figures based on number of sales rather than capital values.
“Given that CBD hotels are generally much more expensive than regional assets, analysing the sales data by volume rather than value makes the shift even more apparent,” Mr Bunz said.
“In 2015 there were 53 hotel transactions across the country with 60% of these based in the CBD market and 40% in more regional areas indicating that investors’ primary focus was on corporate focused hotel investments. So far in 2016 we have seen 37 deals done, with 57% of these based in the CBD and 43% in regional areas as investors turn their focus to leisure assets.”
The shift has been highlighted by a surge in hotel investment activity in key leisure markets such as Cairns and the Gold Coast, both of which recorded 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. For year to June; , RevPar growth remained high in Cairns at 11.1%, with 7.6% growth on the Gold Coast.
“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 Bunz said.
Given the lack of new accommodation coming onto the market in both Cairns and the Gold Coast, demand is 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,” Mr Bunz said.
This has been highlighted by a string of recent sales, including Tradewinds Cairns and the Novotel Cairns in addition to Gold Coast transactions involving the Hotel Grand Chancellor, Surfers Paradise Marriott and Vibe Surfers.”
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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 (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.