WA MARKET OVERVIEW
WESTERN AUSTRALIA
Karen Wales - Head of Hotels, Australia Colliers
Utilizing your expertise, what are the key considerations new market entrants need to make prior to deploying capital into leisure assets? Formal due diligence for hotels usually takes between four and six weeks, but recent deals are lasting on average around 4-6 months, and this is if an agreement on pricing can be reached. Flexibility and creativity are important because things continually and constantly pivot. Timing is also important when placing assets on the market, with waiting occasionally bearing fruit. Once a deal is in play, however, there is no time to lose, and anything you can do to shorten times will increase the likelihood of closing. Leisure markets are inherently smaller than capital cities and therefore have fewer sources of demand. Demand is also skewed towards discretionary expenditure. Investors need to give greater regard to micro-market dynamics and investments in infrastructure, which will stimulate additional demand and be part of a well-thought-through strategy that identifies additional demand segments (e.g., MICE) or opportunities for operational upside. Throughout the pandemic, one of the key trends was the enormous investment into regional leisure assets. Is this still the case, or has the balance returned to capital city/ metropolitan assets? We are still seeing capital targeting both segments, but offshore capital has historically favored major capital cities. Slow supply growth is benefitting existing hotels, particularly as demand continues to recover. Hotels in major centers and other high barrier-to-entry markets will likely see the largest benefit with higher daily rates being achieved. This is where we expect deal flow to be greatest, although securing opportunities in tightly held markets can be a challenge. Looking ahead to the immediate future, broadly speaking, what are some of the assets you & the team are anticipating bringing to market this year (general location, asset subtype, value, etc.)? Colliers is marketing a mix of assets nationally across geographies, both on and off-market, including older hotels for repositioning as well as newly developed stock. In closing, over the longer term, what makes Australia’s leisure markets so resilient & where are the opportunities for investors over the years ahead? The slowdown in hotel supply additions has continued, and new development is expected to remain limited over the next few years. There is financing available, but in many cases, you can buy at a 20% to 40% discount to replacement cost. So, new development is hard to stack.
136 – October / November 2024
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