Get a room: Why hotels are so hot right now
Hospitality assets are hot with their sales overshadowing traditional property sectors and investors, developers and management groups lining up to join boom-time conditions.
Multiple large-scale events and a jump in visitors have combined with a slowdown in construction of new hotels to make for a strong first quarter for the sector, said Karen Wales, head of hotels at commercial agency Colliers.
Sydney’s heritage-listed Hotel Woolstore was originally built in 1888.Credit: Carolyn Cummins
“Against a backdrop of improving demand, room rates have remained elevated with notable growth in Sydney and Melbourne’s luxury hotels with new product received well,” Wales said.
The annual Asia-Pacific Hotel Industry Conference and Exhibition, held mid-week in Adelaide, had more than 1450 delegates from 40 countries around the world. The interest suggests the sector is on a high after almost collapsing during the global pandemic.
Accor has partnered with Melbourne-based Shakespeare Property Group after getting rights to run one of Sydney’s long-standing heritage hotels, the Hotel Woolstore 1888, under its Handwritten Collection portfolio. The Darling Harbour property was originally built in 1888 and is the fourth-oldest of 21 surviving wool stores in Sydney.
Shakespeare Group bought it for $55 million. It’s the fifth hotel where the group has partnered with Accor in Australia, following the Pullman Cairns International, Novotel Cairns Oasis Resort, Novotel Sunshine Coast Resort and Peppers Marysville.
Tourism numbers continue to bounce back after the 2021 slump.Credit:
Richard Saab, vice president hospitality assets and investments at Shakespeare, said they would raise equity from wholesale investors via a single-asset, close-ended unlisted property investment trust, the Shakespeare 1888 Trusts, to fund the deal.
“We’re also seeing rapidly growing demand in the boutique and lifestyle accommodation market, and the Woolstore 1888 is well-placed to capture this growth,” Saab said.
Accor Pacific chief operating officer Adrian Williams, said the group is broadening its portfolio of boutique hotels and bringing together small to mid-size hotels that “authentically reflect the character and warmth of the people who love and look after them.”
The five-level sandstone and brick building has 90 guest rooms over four floors and a 626 square metre footprint on a freehold title. Agents Michael Simpson, Wayne Bunz, Steve Carroll and Hayley Manvell from CBRE brokered the deal.
‘We’re also seeing rapidly growing demand in the boutique and lifestyle accommodation market.’
Richad Saab, Shakespeare
Amora, founded in 1997, has opened an inaugural corporate office in Sydney as it looks to expand across the country. It already owns and operates the Hotel Jamison Sydney, Riverwalk Melbourne and the Hotel Brisbane under the Amora moniker.
Earp Siriphatrawan, Amora’s owner and director, said total visitor expenditure in Australia is forecast to rise from a record high of $170.3 billion last year to $223.3 billion in 2028. “This is an optimum time to invest in the country’s tourism sector,” he said.
“The growth of international arrivals is set to be driven by demand from key Asian source markets such as Thailand, Vietnam, India and the Philippines,” Siriphatrawan said.
Tourism numbers continue to bounce back after the 2021 slump.
Vanessa Rader, head of research at Ray White said data from the Australian Bureau of Statistics for February 2024 showed monthly visitor arrivals reached 857,950, up 42.8 per cent on the same period last year, totalling 7,636,090 arrivals in the past 12 months, up 67.6 per cent.
Melbourne Airport will build a two-brand hotel - Novotel and Ibis Styles - with 464 roomsCredit: Artist’s impression
“Despite higher occupancy and growing room rates, the increased cost of labour and inflationary pressures on goods have impacted trading results for most establishments,” Rader said.
“However, the attractive growth in revenues and high occupancy has renewed confidence in investment into hotel assets by the private sector.”
New hotels planned for the coming year are the Lanson Place Parliament Gardens in Melbourne, a five-star boutique property with 137 rooms, and the Ibis and Novotel at Melbourne Airport. Sydney will get the Veriu Macquarie Park.
Wales said transaction volumes remain strong with sales totalling $529 million to the end of March. CBD hotels are back in focus, she said.
“Some investors remain cautious after one of the most aggressive interest rate hiking cycles in recent history, but quality assets are in high demand as evidenced by recent deal flow.”
Big events had a positive impact, including the Taylor Swift concerts and the Melbourne Grand Prix.
“Investing is always about the future and the current outlook is different to the previous cycle. There are strong structural tailwinds post-pandemic and the industry’s megatrends will increasingly shape investment activity – luxury, lifestyle, sustainability, automation, wellness and a growing Asian middle class, she said.
“This will allow investors to look through any short-term volatility for long-term returns.”
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