Hotel investment appetite strong despite short-term tourism outlook
Sydney, the Gold Coast and Brisbane ranking as the cities expected to perform
Despite a consensus that per-room revenue in some major cities could take three-to-five years to recover to pre-pandemic levels, nearly 90 percent of hotel-industry participants in Australia and New Zealand are looking to maintain or increase their exposure to the sector,
The positive outlook is one of the key takeaways from a CBRE Hotels survey of more than 70 hotel owners, investors, developers and industry consultants, covering topics ranging from revenue recovery to asset values.
The survey shows the signs of recovery are clear in responses to the Market Conditions Survey, as tourism in both countries ramps up following two years of closed borders, even with recent volatility in financial markets.
Asked whether their investment outlook for the sector had changed since early 2020, 50 percent of respondents indicated they would invest more, with a further 38 percent answering their investment level would remain the same.
This is in spite of 62 percent of participants believing it will take three-to-five years for international arrival numbers in Australia and New Zealand to return to 2019 levels.
Most of those canvassed put the same timeframe on revenue per available room (RevPAR) returning to 2019 figures on an annualised basis in Auckland (69 percent of respondents), Melbourne (63 percent), Sydney (54 percent) and Perth (46 percent).
There was more optimism around RevPAR bouncing back next year in Brisbane (51 percent of respondents) and Adelaide (49 percent).
Corporate travel is another cause for encouragement, with more respondents expecting demand to return to 2019 levels next year (44 percent) than over a three-to-five-year period (39 percent).
CBRE Hotels Regional Director, Valuation & Advisory Services, Troy Craig said the hotels sector is continuing to recover from the impact of closed borders.
“While in-bound international traffic is still muted, and survey participants expect it will take three-to-five years to fully return to 2019 levels, recovery in the corporate sector is widely expected to provide a further boost to the current upward swing in 2023,” he said.
According to CBRE Hotels Managing Director Capital Markets, Michael Simpson, the industry’s optimism is underlined by the fact nearly 90 percent of surveyed stakeholders are keen to maintain or increase their exposure to the sector, with only 12 percent looking to reduce their positions.
Half of the respondents anticipate higher interest rates to flow into yields, but 58 percent do not believe inflation will result in stronger average daily rate (ADR) growth.
Capital city hotel values are expected to rise over the next three years, with 55 percent anticipating growth of up to 10 percent and a further 11 percent tipping larger rises.
Queensland and New South Wales are considered the most-attractive markets for hotel purchases or development, with just over three-quarters of respondents expressing an interest in those two states.
That corresponded with Sydney, the Gold Coast and Brisbane ranking as the cities expected to perform most strongly over the coming year.
“Two-thirds of our survey respondents see growth in asset prices over the medium term, in line with recovering visitation,” Mr Simpson said.
“Queensland and New South Wales are clearly the markets attracting the most interest, with Sydney also expected to be 2023’s strongest-performing city.”
Mike Parker-Brown is a UK-trained and qualified journalist and an award-winning travel communicator with more than 30 years experience.
Since 2002, Mike has worked as a freelance writer and PR consultant providing his services to major organisations in Australia and internationally in the tourism, aviation, hospitality, recruitment and export marketing sectors.
