The outlook for Australia's accommodation sector is strong, reflecting both the increased demand for rooms off the back of growth in the domestic and international visitor markets, and the historically lower levels of new supply.
RevPAR on the rise
Capital city accommodation has seen high occupancies for the year ending February 2017. Hobart, Sydney, Melbourne and Cairns reported strong results of over 80 per cent (STR Global, Ltd). This demand has significantly improved the hotel sector’s Revenue Per Available Room (RevPAR) in recent years and is expected to continue to rise, with Deloitte Access Economics projecting growth of 3.1 per cent by 2019.
Hotel Investment Returns
Compared to other property types, hotel investments performed favourably over the last ten years to December 2016. The risk return profile of hotel assets was superior to that of other asset classes, having similar volatility to industrial and office assets, however, considerably outperforming with higher returns.
Future Prospects Remain Positive
Deloitte Access Economics reported that 2017 remains positive for the Australian hotel sector. They expect room nights sold to grow over the next three years at 2.7 per cent per annum, and national occupancy rates to climb to 70.8 per cent by 2019. Revenue per available room is forecast to grow by 3.1 per cent over the next three years, and average room rates are expected to increase at an average of 2.5 per cent over the same period.
Recent Hotel Transactions
2016 continued to deliver a steady number of hotel sales across Australia, off the back of a record year in 2015. Colliers International reported a total of $2.7 billion in hotel transactions for 2016, with key highlights including:
- The largest transaction of the year - the $700 million Ribbon development in Sydney's iconic Darling Harbour precinct
- Chinese investors continue to dominate over other buyer origins, with 37 per cent of the sales by value for 2016
- New South Wales lead sales volume with an estimated 40 per cent of total hotel sales by value
Source: Colliers International, Hotel Sales 2016