Friday, 23 March 2012. OurProperties.com.au
Offshore investors, especially investors from China, Taiwan, Hong Kong, Malaysia and Singaporeremain keen on the Australian hotel market even as domestic institutional investors continue their exodus from the sector, according to Colliers research.
Singapore’s Ascendas entered the Australian market for the first time, but local companies Commonwealth Property and Mirvac are selling off their hotel assets.
“Strong demand from overseas investors is expected to continue in 2012, despite the strong Australian dollar,” says Colliers director of research Nora Farren.
“Offshore investors still see value in Australian assets and view the market, particularly those assets with exposure to business travellers, as safe, long-term investments.”
The hotel sector gave the greatest return of all commercial assets for 2011, showing a return of 17.8%. Office, retail and industrial assets all showed returns of around 10%.
The strong returns were driven by a lack of new supply and a rising corporate travel market.
CBD hotels enjoyed strong capital returns of 9.3% during 2011 driven by increasing occupancies and room rates.
Of the $1 billion of sales identified by Colliers, the biggest transaction was the $310 million sale of the Mirvac hotel portfolio to an Asian consortium.
There were $1.25 billion of hotel sales in 2010.
The Mirvac acquisition includes Mirvac Hotels and Resorts, a management company of 48 hotels (including two owned hotels) representing 6,100 rooms as well as a stake in the Mirvac Wholesale Hotel Fund, which owns seven of the hotel assets.
The Perth hotel market is likely to continue to outperform other domestic locations in the near-term, buoyed the strongest growth in revenue per available room (RevPAR) at 18% and healthy investment and construction activity.
Australia’s average RevPar growth was 5%, with Adelaide and Gold Coast both recording decreases.
Across Australia, the average room rate increased by 4.8%, with Perth up 9%.
“Asian buyers are showing a keen interest in the Perth market, seeking exposure to the city as it benefits from the mining boom,” writes Farren.
“Construction activity in the Perth hotel sector is expected to gather pace, with a hotel to be included in the Perth Waterfront project, and the expansion of the Crown Perth casino to potentially include a five-star hotel and entertainment complex.”
The number of Chinese visitors arriving each year is increasing 12%, according to the ABS, and they will contribute one-third of the growth in Australia’s tourism export earnings until 2020, says Colliers. In 2011 there were 60% more overseas trips by Australians than five years previous.
“We have been having a number of extremely wealthy investors from China asking to buy motels and hotels here in Melbourne and in Queensland,” Michael Yang, Chief Executive Officer of GiFang.com says, “a group affiliated with China Southern Airlines has bought an apartment building for a reported $1 Billion AUD last year. The trend is certainly there.”