The hotel industry is booming
By all measures, the hotel industry is one of the hottest sectors on the market.
First, it’s attracting a lot of investment, not just from pubs and restaurants being put on the market but from Asian investors targeting hotel acquisitions.
According to the latest figures, Asian investors have pumped $8.2 billion into Australian hotel acquisitions, dwarfing the $3.2 billion spent by domestic purchasers.
According to data from CBRE’s MarketView, Asian investors are focusing on regional locations.
The most activity has been in North Queensland with examples including the Novotel Oasis in Cairns, which sold to Shakespeare Property Group for $48 million, and the Rydges Esplanade Cairns, which sold for $40 million to Mulpha Group.
At the same time, new rooms are being added.
Australia passed the 100,000-room mark in 2016 and there are forecasts of another 4000 rooms being added next year and then 5000 in 2018.
The last time Australia was in this space was in the lead-up to the 2000 Olympics when 7500 rooms were added between 1998 and 2000. That however was followed by a bust with the international and domestic economy nose-diving and with wars and airline collapses all contributing to the economic downturn.
It’s all very different now with the tourism industry booming and Australian Bureau of Statistics figures showing a record number of overseas visitors coming to Australia led by Asian arrivals. The data shows n occupancy rate of 66.2 per cent over FY16 – up from 64.8 per cent and 64 per cent in the two previous years – while room rates hit $174.5 a night in FY16 up from $171.5 in FY15.
There is one problem: the lack of land in cities. Not to worry, hotel developers cashing in on the tourism boom have been converting existing buildings to hotel use.
Examples include the conversion of Greater Union cinemas in Russell Street, in the heart of Melbourne’s CBD, into the QT Hotel. And in Sydney, the art-deco Metropolitan Water and Sewerage Board building in Pitt Street was converted into the city’s latest 5-star hotel, the Primus.
So how far will it go? AccorHotels Australia boss Simon McGrath says the ABS data doesn’t fully reflect the strength of the sector.
"These figures don't show the strength of the capital cities. Sydney is at a constant 90 per cent occupancy rate. They also don't show the strength of leisure markets like northern Queensland," Mr McGrath told the Australian Financial Review.
"Most of our new hotel deals are for brand new hotels, both in the cities and in the regions," he said.
"Tourism is now genuinely a tier one sector of the economy. Everyone is talking about it in an eloquent and knowledgeable way.
"Most state governments now realise you need to invest in both hard and soft tourism infrastructure (events and conferences) to support new development.”
by Leon Gettler, November 29th 2016
