Despite a year of lockdowns and continued travel restrictions, Australian hotel revenues have risen to over $2 billion this year, a five-year record and up from $681 million in 2020.
According to new CBRE Hotels data, activity has been fuelled by a wave of hotels sold for residential and build-to-rent conversions, as well as major portfolio sales, such as the Tucker Box Hotel group’s $620 million sale of 11 Travelodge hotels, and landmark single-asset transactions, such as last week’s $315 million sales of the Sofitel Wentworth Sydney.
As per Troy Craig, Regional Director, Valuation & Advisory Services at CBRE Hotels, over one-fifth of 2021 sales by value have been to purchasers considering conversions, putting this year’s sales tally on track to be in line with historical trends.
“That’s fairly extraordinary considering the prolonged border closures,” Mr Craig said, adding that purchasers are seeking possibilities to reposition existing assets to capitalise on the strength in the residential market and increased interest in build-to-rent prospects.
“We’ve also seen offshore-backed money continuing to seek hotel investment possibilities, resulting in prices per room approaching pre-Covid levels.”
The national wide Tucker Box portfolio, which was bought by Singapore sovereign wealth fund GIC, Swiss private equity company Partners Group, and Melbourne-based Bayview on the Park, was by far the largest transaction this year.
The second focal area has been conversions, as seen by the $70 million+ sale of Melbourne’s Bayview of the park to Aware Super, the 125$ million sales of Vibe Rushcutters for a residential conversion, and the $178 million sales of the Intercontinental Hotel at Double Bay for combined hotel and residential project.
“Developers are capitalising on the continued strength of the residential market and the interest in build-to-rent opportunities to acquire well-located, fringe city hotels, which will likely have a slower recovery trajectory than CBD accommodation assets and have a higher and better use as residential given their location”, said Micheal Simpson, Managing Director, Capital Markets at CBRE Hotels.