International capital continues to play a key role in Australia’s hotel investment landscape. In recent years, Australia has seen a solid increase in capital inflows from Asian markets including China, Singapore, Hong Kong and other ASEAN markets, a trend which reflects Australia’s close ties with these nations.
With investors from Mainland China falling behind the rest of Asia as the largest group of outbound capital in 2018, Asian investors from South East Asian countries – notably, Singapore - have dominated Australia’s offshore investment landscape. This rise has largely been driven by renewed interest in diversification, both in terms of location and product. The low Australian dollar coupled with strong tourism growth has helped fuel offshore buyer demand for hotel investments nationwide.
Singaporean investors have a long history of investing in Australian hotels. They are currently the second largest ownership group of Australian hotels with almost $9 billion of hotel real estate under their control and a very high proportion of portfolio owners. Singaporean developers are also progressing a number of major hotel development projects, reflecting their strong development expertise and familiarity with the Australian market.
Karen Wales, Director, Transaction Services, Hotels Asia Pacific, Colliers International
Rising demand for luxury
Growth in demand for luxury offerings has largely been domestically driven, with a 5.3 per cent increase in domestic visitor nights in luxury establishments in 2017-18. The changing expectations among domestic consumers are contributing to a greater diversity of offerings. Australia has benefited from significant investment by overseas companies looking to capitalise on the surge in consumer demand for luxury experiences, with available rooms in 2017-18 rising 3.9 per cent, a growth rate higher than any other accommodation type.
The biggest hotel deal of 2017 was Singapore’s UOL Group’s acquisition of the 396-room Hilton Melbourne South Wharf for $230 million. The listed real estate group, chaired by one of Singapore’s richest men, Wee Cho Yaw, acquired the five-star business hotel from Host Hotels & Resorts and infrastructure investor Plenary Group. The hotel has been rebranded as the Pan Pacific Melbourne, one of two hotel brands operated by UOL. The acquisition of the hotel takes UOL’s Australian hotel investment portfolio to five alongside the 486-room Pan Pacific Perth and PARKROYALS in Darling Harbour, Parramatta and Melbourne Airport.
Singapore-based M&L Hospitality owns Australia’s largest upscale, full-service hotel, the recently expanded Hyatt Regency in Darling Harbour. In 2017, M&L led a $250 million transformation of the hotel, including the development of a new 24-storey tower and the addition of 222 guestrooms, bringing the hotel’s room count to 892. The last couple of years have been eventful for the group, with the $80 million acquisition of Perth’s 256-room Novotel Langley Hotel and the opening of the 182-room West Hotel in Sydney – representing one of only two newly constructed hotels in the Sydney CBD in 17 years.
Singaporean-based developer Pontiac Land Group has won the rights to the $300 million redevelopment of the heritage sandstone buildings in the heart of Sydney. Designs released show ground-level retail and dining and a rooftop salon, in addition to more than 250 hotel rooms and suites across the two buildings. The heritage redevelopment will allow locals and visitors to enjoy the history and heritage of the Sandstones for the first time since they were built in the late 1800s. Pontiac has paid the NSW Government $35 million for a 103-year lease and brings extensive experience in the adaptive re-use of heritage buildings, including Singapore’s flagship Capella Hotel.
Growth of mixed-use developments
A substantial share of new hotel rooms are coming from mixed-use developments, reflecting their popularity around the globe, particularly in Asia. These developments typically combine a hotel with additional residential, commercial or entertainment spaces. Geographically, mixed-use development has been concentrated in Australia’s four gateway states with more than 70 projects under construction in New South Wales, Victoria, Queensland and Western Australia.
Fragrance Group Limited (FGL) is an investment company controlled by billionaire developer Koh Wee Meng, renowned for building a series of budget hotels in Singapore. The $44.5 million Premier Tower represents the company’s maiden project in Australia, a mixed-use 78-storey development in Melbourne, integrating 796 apartments and 167 hotel rooms. The tower is located on the 1800-square-metre site of the former Savoy Tavern, a single-storey 1970s brick building. In a period of just six weeks, Fragrance Group purchased two Melbourne sites – including the Savoy Tavern - and a Hobart property, injecting $126.5 million into Australia.
TFE Hotels formed in 2013 as a joint venture between Australia’s Toga Group and Singapore’s Far East Hospitality Holdings, a member of Singapore’s largest private property developer. The group has grown to operate 73 hotels with over 10,000 keys in Australia, New Zealand, Asia and Europe under six brands traversing residential and commercial portfolios: Adina Apartment Hotels, Medina Serviced Apartments, Rendezvous Hotels, Vibe Hotels, Travelodge Hotels and the new TFE Hotels Collection. Singapore-based Naumi Hospitality has recently acquired the 116-room Rendezvous Hotel Sydney Central for $38 million, a property which will continue to operate under the management of Rendezvous Hotels when it opens in 2020.
In Queensland, Singapore’s Banyan Tree Hotels & Resorts have won the managerial rights to operate two brand new resorts and a residential complex on Lindeman Island, a project which has been valued at $600 million. The resort is proposed to include a new 5-star facility, 6-star resort, 5-star eco resort, 89 tourist villas, a central village precinct, upgrades to the existing jetty and golf course and 30 glamping facilities.
Emergence of Singapore-based boutique hotel brands
Australia has a small but growing boutique/lifestyle hotel segment with an established collection of well-known independent hotels primarily located in the major state capitals. In recent years, Australia has seen the entrance of Asian - and specifically Singaporean - boutique and lifestyle operators such as the Unlisted Collection (Old Clare), Como Hotels (Como The Treasury) and most recently, the Fullerton Hotel (Sydney).
The Old Clare Hotel is largely attributed with putting Sydney’s inner west suburb Chippendale on the map. Situated along the redeveloped Kensington Street precinct, the 62-room boutique hotel stretches across two iconic heritage-listed buildings – the century-old Clare Hotel pub and the Carlton & United Breweries Administration Building. The Old Clare Hotel represents the first Australian hotel from the Unlisted Collection, a set of properties from Singaporean Peng Loh. The Unlisted Collection comprises high quality boutique hotels and restaurants in Singapore, London, Shanghai and now Sydney, including seven boutique hotels and twenty restaurants.
Como The Treasury is an elegant 48-room urban hotel located in the revitalised historic heart of Perth. The hotel is housed in the 19th-century State Buildings, which formerly served as a post office, land titles office and treasury. The hotel is managed by Singapore-based Como Hotels and Resorts, a group of privately owned and operated island resorts, city hotels and luxury adventure retreats from London to Bhutan. Owned by hospitality and retail billionaire Christina Ong and her husband Beng Seng Ong, Como has a history of hand-selecting special properties around the globe based on their heritage and unique features. In just a few years, Como The Treasury has established itself as a leading luxury hotel of international standards in Australia and worldwide.
In 12 months’ time, Sydney’s Westin Hotel will be rebranded to the iconic Singaporean Fullerton Hotel brand, marking the group’s first international expansion and representing another phase in Sydney’s hotel boom. Fullerton Hotels currently operates two properties in Singapore in the form of the 2001-opened Fullerton Hotel Singapore (classed as a national monument) and the Fullerton Bay Hotel Singapore, which first welcomed guests in 2010. The Fullerton Hotel Sydney will become a sister hotel to The Fullerton Hotel Singapore, both of which share a similar rich history as former General Post Offices (GPOs).
Growing Importance of Singaporean Institutional Capital
Another characteristic of the Australian hotel landscape is the growing trend of Singaporean institutional investors looking to expand their Australian hospitality holdings via acquisitions and joint ventures. In 2017, Singaporean CapitaLand’s wholly owned serviced residence business, The Ascott Limited, acquired a majority stake in Quest Apartment Hotels for $180 million, making it the largest serviced residence provider in Australia. Other Singaporean-based institutional investors with pools of capital in Australia include Frasers Property, Ascendas-Singbridge Group and City Developments Limited (CDL).
Despite the continued outbound capital restrictions in China, Australian hotel investment is on track for another robust year supported by investors from Singapore, as well as markets such as Hong Kong, Malaysia and the Middle East.
Sources: Colliers International, Capital Markets Investment Review, 2017/18 ANZ; Tourism Research Australia, Tourism Investment Monitor 2017-18; Industry sources.