Hotel investment continues to flow into 2016

Investment in the hotel sector was significant during 2015 and is expected to follow throughout 2016. Strong demand from investors within the hotel sector is, no doubt, due to a number of factors currently influencing Australia including:

  • The strong occupancy results for hotel accommodation;
  • The recent increases in tourism and the low cash rate environment (particularly the low AUD to the US dollar); and
  • The tightening of supply and scarcity of quality hotel and leisure stock in the market.

According to STR Global, an analysis of the ‘occupancy rate’ and ‘revenue per available room’ revealed substantial improvements in the tourism market, in particularly within Sydney. In comparison to December 2014, the 2015 results showed an overall growth in Sydney hotels indicating a 7.25% increase in occupancy rates, -2.67% fall on average daily rate and 4.43% increase in revenue per available room.

Hotel sales for the first quarter of 2016 were steady. Majority of sales took place in metropolitan locations. To date, the following sales have already taken place this year:

  • The TRYP by Wyndham hotel in Fortitude Valley, QLD sold for over $20 million. The sale reflects a yield of 7.8% and a rate of more than $307,692.30 per room (January).
  • Toga Far East Hotels has agreed to a long-term leaseback agreement after selling the Vibe Hotel Sydney for $90 million. The sale reflects a yield of around 5% and a rate of $471,204.20 per room (January).
  • The Tune Hotel in Carlton, VIC sold for $52 million; reflecting a rate of $231,111.10 per room (February).
  • The Crown Plaza in Terrigal, NSW sold for over $60 million. The sale reflects a yield of approximately 7% and a rate of $301,507.54 per room (February).
  • The Adina Apartment Hotel Norwest in Baulkham Hills, NSW sold for $60 million. The sale reflects a rate of $550,458.72 per room (February).
  • Charter Hall paid $75 million for a portfolio of three pubs. The Seaford Hotel in Seaford, VIC; the Royal FTG Hotel in Upper Ferntree Gully, VIC; and Kondari Hotel in Hervey Bay, QLD. The portfolio sale reflects an initial yield of 6.28% and the average lease expiry is 19 years (March).
  • The Greenmount Resort in Coolangatta, QLD sold for $26 million reflecting a rate of $172,185.43 per room (March).
  • The Rydges Tradewinds Cairns, QLD sold for $34 million reflecting a rate of $138,211.38 per room (March).

Majority of hotel sales within 2016 have been made by fund managers, property development companies and syndicates and private buyers.

Preston Rowe Paterson regularly release research reports for a variety of property classes including the Hotel and Leisure market. To view the latest report on the second half of 2015 please click the link below:

http://www.prpsydney.com.au/wp-content/uploads/2016/03/Sydney-Hotel-Leisure-December-2015.pdf

For all other Preston Rowe Paterson research reports visit the ‘Research & Media’ tab.

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