Buyers tipped to chase hotels in the two Australian gateway cities

By The Australian (Ben Wilmot)

Australia has been identified as one of the preferred markets in the Asia Pacific among hotel buyers but stock remains tight despite major sales being struck in Melbourne and Sydney.

Buyers are tipped to chase ­hotels in the two Australian gateway cities as room rates are lifting and the market is absorbing new supply from local and international developers.

Average rooms rates grew nearly 8 per cent in the year to January to $219.31 while demand rose nearly 5 per cent, according to STR data released yesterday. “The 82.1 per cent absolute occupancy level would be the highest for any January on record in the market,” said STR adding the ­occupancy growth was impressive given Sydney has experienced significant supply growth.

The market has also been bolstered by a series of record-breaking deals, with Japan’s Daisho group this month finalising a deal to pay about $235 million for a new W Hotel in Melbourne being developed by Cbus Property.

That deal, brokered by ­Michael Simpson of Savills, will see a 294-room hotel in the $1 billion-plus mixed-use luxury Collins Arch precinct open in 2020, with the five-star property understood to have transacted at about $800,000 per room.

Developer Golden Age has put the Sheraton Hotel Melbourne on the block with hopes of about $140m after it snapped up a nearby site from the private Grocon for about $75m. Mark Durran of JLL and Mark Wizel of CBRE are steering that campaign.

In Sydney, the Royal Group is selling the InterContinental Sydney Double Bay via Craig Collins of JLL with pricing expectations in excess of $150m.

The 140-room hotel sits in one of Sydney’s most exclusive suburbs and has extensive conferencing facilities and one of the city’s most spectacular rooftop pools.

Mr Collins noted the opportunity to acquire a landmark hotel on a site of more than 3600sq m would be chased by investors as little had been available in the wake of a series of high-profile purchases in 2015.

“The InterContinental Sydney Double Bay is the first five-star hotel in the city to be offered to the market since the record breaking Westin Sydney transaction took place in 2015,” he said.

Singaporean company Roxy-Pacific Holdings is also selling an office tower in the Sydney CBD that can be converted into a mixed-use complex with 407 hotel suites and 90 residential units.

JLL and Colliers International are handling that sale.

JLL latest research on global hotel investors said Australia was a core focus for investors but it cautioned that some cities would come under pressure this year.

“New stock is certain to place pressure on room rates in Brisbane and Perth. However, in Sydney and Melbourne, where occupancies have neared the 90 per cent mark in 2016, expectations are for the new supply to be more than matched by tourism demand,” JLL said.

Sydney’s robust fundamentals would see elevated activity in both the churn of existing hotels and new-build opportunities, JLL said.

Hotels in Cairns and the Gold Coast were also in demand as airline capacity and the low Australian dollar stimulated domestic and inbound travel.

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