THE PROPERTY DEVELOPMENT REVIEW
“The lion’s share of Premium stock is in Sydney, with an estimated value of more than $22 billion. “Notwithstanding the boom in Premium stock underpinning evolution of the sector, Australia will still be under-represented when it comes to Premium lifestyle hotels, despite more brands coming to our shores throughout 2024, expanding on the currently available 6,000 rooms or 5% of the total Premium hotel market. “Strategic investors will look past any short-term volatility for long-term returns, which lie with industry megatrends such as lifestyle, sustainability, automation and wellness. “In contrast to Premium stock, secondary or older assets are appealing to investors targeting the hotel sector for conversion to alternate uses, including Build-to-Rent, co-living or residential as State and Federal Governments tackle a lack of housing supply. “The uptick in listings seen in Q3 2023, and the fact that there are currently around $2.2 billion assets currently on the market, points to higher levels of investment activity over 2024, and we expect transaction volumes to reach $2.5 billion. “While 2024 will bring both new challenges and generational opportunities for hotel investors, pent-up demand for travel remains elevated and the sector’s market dynamics indicate progressive recovery to pre-pandemic norms. “Investing is always about looking to the future, and pre- pandemic investment theses will not necessarily prove beneficial for 2024 and beyond.”
slowed down acquisitions as external pressures built, with the belief that better buying will materialise in 2024, according to Colliers National Director of Hotels Neil Scanlan. “A superior level of due diligence and asset level performance will become more important for purchasers than in recent years when low interest rates, competitive capital flows, and cap rate compression lifted the market overall.” Mr Scanlan said. Premium hotels are anticipated to continue to outperform older competitors with luxury and upscale hotels boasting an average occupancy rate over 70% and a national average ADR of $326 over FY23, according to the Australian Accommodation Monitor. Sydney’s luxury segment recorded a stellar year, with room rates up 26 per cent compared to pre-Covid, averaging $450 in 2023. This segment also benefited from new ultra-luxury product such as Crown Resort and Capella Sydney, as well as lifestyle luxury brands W and Ace Sydney. “New stock has been predominantly located in capital cities, but the allure of luxury is now spreading to key leisure destinations, with 1,000 rooms either recently opened or planned for the Gold Coast, across brands such as Langham, Mondrian, St Regis and Ritz Carlton.” Mr Scanlan said. “Australia’s high performing Premium hotel market has swelled over the past ten years with the development of more than 36,000 new rooms.” Ms Wales added. “There are now more than 117,000 Premium hotel rooms nationally, with a combined value of almost $60 billion, providing a breadth of opportunity for sophisticated hotel investors.
Premium (+$50 million) Hotel Sales 2023
Property
City
State
Rooms
Price
Price per Room ($)
Waldorf Astoria
Sydney
NSW 220
$520 million
$2.4 million
Escarpment Portfolio *
Various
NSW 237
$200 million
Not applicable
Batman Hill on Collins
Melbourne
VIC
190
$55 million
$289K
Sheraton Grand Mirage
Gold Coast
QLD
295
$192 million
$650K
Ibis & Novotel
Melbourne
VIC
472
$170 million
$360K
Sofitel Adelaide
Adelaide
SA
251
$154 million
$613K
The Old Clare Hotel
Sydney
NSW 69
$61.8 million
$895K
Courtyard by Marriott
North Ryde
NSW 196
$55.5 million
$283K
Novotel Sydney Parramatta
Parramatta
NSW 194
$53.5 million
$276K
Oaks on William
Melbourne
VIC
220
Confidential
Confidential
TOTAL
2,344
$1.529 million
$652K
*Note: Structured deal and included more than real estate
April / May 2024 – 9
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