Australian hotels sales have surged to almost $2 billion this year – hitting a five-year high and up from just $681 million in 2020 – despite a year of lockdowns and ongoing travel restrictions.
New CBRE Hotels data highlights that activity has been propelled by a wave of hotels being sold for residential and build-to-rent conversions in addition to major portfolio sales, including the $620 million sale of 11 Travelodge hotels by the Tucker Box Hotel group, and landmark single asset transactions such as last week’s $315 million sale of the Sofitel Wentworth Sydney.
CBRE Hotels’ Regional Director, Valuation & Advisory Services, Troy Craig said close to one-fifth of the 2021 sales by value had been to buyers planning conversions, with the activity putting this year’s sales tally on track to be in line with historic averages.
“That’s quite remarkable given ongoing border closures, with activity being underpinned in part by purchasers looking at opportunities to reposition existing assets to capitalise on the strength in the residential market and rising interest in build-to-rent opportunities,” Mr Craig said.
“We’ve also seen offshore-backed capital continue to pursue hotel investment opportunities, which has led to prices per room being close to pre-COVID levels.”
By far the biggest sale this year involved the national Tucker Box portfolio, which was acquired by Singapore sovereign wealth fund GIC, Swiss private equity firm Partners Group and Melbourne-based Bayview on the Park.
Conversions have been the other focus area, as highlighted by the $70 million+ sale of Melbourne’s Bayview of the Park to Aware Super, the $125 million sale of Vibe Rushcutters for a residential conversion, and the $178 million sale Intercontinental Hotel at Double Bay for a combined hotel and residential project.
CBRE Hotels’ Managing Director, Capital Markets, Michael Simpson said, “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.”
In a separate Hotel Outlook report, CBRE predicts that CBD hotel markets will return to 2019 performance levels in three to five years as lockdowns end and international travel recommences.
“While the RevPAR growth trajectory stalled in Australia after a promising start in H1 2021, this has provided reassurance that once the COVID shackles are removed pent up domestic demand will quickly translate into increased hotel occupancy, which will sustain and drive average daily room rates,” Mr Simpson said.
“Restricted international travel will recommence next month and will gradually increase as reciprocal travel bubbles are initially established, which will inevitably lead to normal international travel routes and activity.”