Australia’s next Olympic state sweeps the podium in 2023 hotel performance improvement
Almost all Australian tourism and accommodation markets are coming off a record year with 2023 being one of, if not the best, 12 months of trade recorded. Whilst many markets recorded strong gains, it was Queensland that was the standout performer, according to JLL Hotel & Hospitality Group’s Senior Vice President Gareth Closter.
Strong occupancy, coupled with substantial increases in Average Daily Rates (ADR), have produced sharp rises in RevPAR levels across the board. According to STR’s latest YTD December numbers, RevPAR performance for 2023 vs 2019 saw the three major Queensland markets take the top three spots: first, Brisbane with a substantial 46% uplift, second, Cairns with an outstanding 34% increase and then the Gold Coast, with an impressive 33%, coming in third nationally.
These sharp rises in RevPAR can be attributed to the substantial gains in ADRs, which rose a staggering 52% (Cairns), 47% (Brisbane) and 38% (Gold Coast), with occupancy at, or slightly below, 2019 levels. These markets were all coming off a low base, however there does seem to be a generational shift in ADRs in Queensland.
This strong trading performance has certainly not gone unnoticed by investors, with Queensland elevating to second nationally in terms of annual hotel transaction volumes. 2023 saw c.$564 million in hotel transactions in Queensland, or 23.2% of the overall national sale volume of c.$2.43b for the calendar year. This total sale volume for the state was more than double the c.$271 million recorded in 2022, and shows that Queensland is clearly on hotel investors’ wish lists.
“Throughout 2023, JLL Hotels & Hospitality Group witnessed an increase in the depth of the investor market for hotel assets in Queensland, particularly in the second half once interest rates stabilised,” Mr Closter commented. “Queensland is seen to offer real value compared to the larger markets of NSW and Victoria, and the growth story, particularly in South East Queensland, is undeniable”.
This was clearly demonstrated in the recent sale of the Mercure Kawana Waters, an 81 key hotel on the Sunshine Coast, which Mr Closter sold. The previous sale of this hotel was in 2019, which took around a year to complete. Fast forward four years and the hotel sold at a 57% uplift to the previous sale and settled 77 days after the close of the Expressions of Interest process, with huge buyer depth for the asset.
“This sale process is an excellent reflection of the substantial change in market dynamics for hotel investment in South East Queensland,” Mr Closter remarked. “The uplift in value almost mirrors the improvement in RevPAR for the region, and the buyer pool depth – coupled with the sophistication of the buyers who participated in the process – says a lot,” he continued.
South East Queensland dominated both the improved RevPAR performance and transactional activity for the state. Hotel transactions in this region included the Sheraton Grand Mirage Gold Coast ($192m), Sofitel Brisbane (c.$178m), Quest Woolloongabba (c.$44m), The Park Hotel ($33.8m), Menso at Southbank (c.$27m), The Incholm by Ovolo Brisbane (c.$25m), Mercure Kawana Waters ($21.25m) and Quest Chermside (c.$14m).
As the state’s capital and future Olympic city, Brisbane has been the standout performer as we move into the “Golden Decade”. Perhaps the most famous of its hotels, the Calile on James Street, was recently awarded the 12th best hotel in the world by The World’s 50 Best Hotels Academy, in a huge vote of confidence for Brisbane.
The highly anticipated delivery of the Queens Wharf project, currently scheduled for August this year, will only add to the growing list of reasons to visit the region, and will undoubtedly increase its presence on the world stage. Brisbane is fast becoming a standout leisure destination as it matures into a truly global city.
“Continued hotel performance improvement seems highly likely as international in-bound arrivals increase and new hotel room supply remains benign – and all this before the ‘Olympic effect’ kicks in to accelerate growth in the sector!” Mr Closter commented.
Whilst there are obvious challenges ahead for hotel performance and investment, with softening macro-economic conditions and hotel performance set to stabilise over the next 12-18 months, Queensland, and particularly South East Queensland, look set to enjoy the “Golden Decade” ahead in the lead up to the 2032 Brisbane Olympics.
“The Queensland hotel market currently presents an opportunity for existing owners to divest at what are historically high levels, whilst buyers can get in and enjoy potential future growth in the market,” Mr Closter said. “There is a compelling ‘why’ for each side of the equation, which will make for extremely interesting market conditions ahead,” Mr Closter finished.
JLL, 20th February 2024
