WA MARKET OVERVIEW
WESTERN AUSTRALIA
Karen Wales - Head of Hotels, Australia | Colliers
Thank you for your contribution to *The Property Development Review* publication – to begin, walk us through your sense of the macroeconomic environment relative to the hotel & hospitality market sectors. Broadly, the hotel market has continued to trend well this year, following an incredibly strong recovery post-pandemic with higher RevPAR across various geographical markets underpinned by stronger demand drivers such as MICE, sports events, concerts, and the recovery of international tourism towards pre-Covid levels. Investors remain optimistic about the sector as post-pandemic travel continues to grow but are mindful that economic growth, geopolitics, and the timing of rate cuts also present as potential risks. Geopolitical risk remains elevated, with half the world’s population seeing 2024 elections including the US, the EU, India, Russia & South Africa. The recovery of Chinese arrivals is becoming evident and widely anticipated to help create demand compression in the market. And from there, reflecting on 2024 to date, take us through some of the key transactions that have occurred & perhaps the profile of some of these deals in terms of vendor/ purchaser, level of buyer interest, yield, etc. Transactions show a notable downward trend over the past year due to drawn-out negotiations and a harder market for capital raising. During the first three quarters of 2024, there were about $1.2 billion worth of hotel transactions nationally, almost 40% lower than the same period for the year prior and slightly below the level recorded in 2019, with fewer high-value transactions through the mid-part of the year. Hotel investment volumes were bolstered during the first six months of 2024 with four premium asset sales (above $50 million) accounting for almost 60% of deal flow, but we have only seen one high-value transaction during the third quarter being Salter’s purchase of the Bannisters portfolio. Investment funds and privates have been the most active buyer groups, with the continued dominance of domestic capital. In terms of deal flow, what have been the major trends or themes that you’ve observed over the past three or so quarters? Deal activity remains slow due to a bid/ask spread after an incredibly strong recovery. The ongoing high cost of debt, a buyer’s unwillingness to fully price future growth, or commit to major capital investment are all factors that have slowed the pace of transactions. Ongoing macroeconomic tailwinds and moderating RevPAR have the potential to introduce a completely different dynamic, one that has not been experienced since 2021. Investors are expected to focus on those hotel markets where performance has been resilient, and with moderate levels of new supply.
KAREN WALES
134 – October / November 2024
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