REPORT FROM AUSTRALIA—Strong hotel performance in Australia is drawing increased interest from investors, especially those from the Middle East and Asia. The latest transaction, announced last week, was the purchase of 31 Accor-branded hotels in Australia by the Abu Dhabi Investment Authority of Tourism Asset Holdings Limited.
“The ADIA acquisition of the (Tourism Asset Holdings) portfolio continues an active period of hotel portfolio sales in Australia,” said Stephen Burt, managing director of hotels in Asia/Pacific for Colliers International, in an email. “This is the fifth major portfolio sale in the last three years, and in most cases they are characterized by domestic vendors selling to Asian or Middle East-based institutional buyers.”
Recent transactions of Australian hotels include single-property purchases and portfolio sales:
- Earlier this month, South Korea-based Mirae Asset Global Investment purchased the 531-room Four Seasons Sydney from Eureka Funds Management for $340 million. In a news release announcing the sale, Craig Collins of Jones Lang LaSalle’s Hotels & Hospitality Group, which brokered the sale, said the hotel generated interest by investors from China, Hong Kong, Singapore, United States and Korea.
- Last year, Starhill Real Estate Investment Trust, an affiliate of Malaysia-based YTL Hotels, bought three Marriott Hotels with a combined 1,016 rooms in Sydney, Brisbane and Melbourne. The price of the transaction was $415 million Australian dollars ($388.1 million).
- In 2010, Singapore-based CDL Hospitality Trust purchased five Accor-branded hotels in Brisbane and Perth. The 1,139-room portfolio sold for AU$175 million ($163.6 million).
Last week’s sale of Tourism Asset Holdings included hotels from across the country with a concentration in the major cities in the state of New South Wales. Of 31 properties in portfolio, 14 are in Sydney and two in Canberra. The mostly mid-market group included a number of Accor brands, including, Pullman, Novotel, Mercure, Ibis, Ibis Styles and Ibis Budget. Accor will continue to operate the hotels.
The ADIA, Tourism Asset Holdings and Accor either declined to comment or did not return requests for comment by press time.
“The attraction of Australia for the offshore institutions is a combination of factors, including the availability of scalable investments, reasonable initial yields, a stable economy, attractive REIT structures and a transparent legal system,” Burt said. “All of these attractions are still prevailing, and we can expect to see further offshore interest in Australian hotel portfolios.”
Hotels in Australia, and Sydney in particular, are recording strong performances this year. Occupancy for the country year to date through July was 72.8%, according to STR Global, sister company of Hotel News Now. Average daily rate was up 1.8%, and revenue per available room increased 2.6%, when reported in local currency.
Preliminary August data for Sydney showed a 2.1% increase in occupancy to 85.5%, a 4.2% increase in ADR to AU$189.29 and a 6.4% rise in RevPAR to AU$161.89.
“The Australian economy is still firm, supported by a strong Australian dollar,” said Elizabeth Winkle, managing director of STR Global, in a news release. “Demand showed a faster growth rate than supply, leading to good occupancy rates in August 2013. Australia remains a popular holiday destination for both European and Asian tourists due to its natural scenery and political stability.”
The forecast for Sydney from STR Global for the next two years is also positive. In 2014, average occupancy is forecast to reach 82.5% and slip slightly to 82.4% in 2015. Supply growth will be muted, with a 1.4% increase slated for next year and a 2.3% rise in 2015.