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Australian hotel investment soared in 2023

JLL Hotels & Hospitality’s latest Transaction Overview reveals the key investment trends, shifting capital behaviours and significant transactions over 2023

In a year marked by improved liquidity and a robust trading recovery, the Australian hotel investment sector experienced substantial growth in 2023, according to JLL Hotels & Hospitality’s latest Transaction Overview.

Driven by enhanced investor sentiment and a continued trading recovery, hotel investment volumes, involving transactions valued at A$5 million or more, reached an impressive A$2.43 billion. This represents a remarkable year-on-year increase of 26 percent and exceeds the 10-year long-term average of A$2.14 billion.

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Transaction activity remained strong, with 53 deals being finalised throughout the year, encompassing approximately 5500 hotel rooms. This figure surpasses the 51 sales (4100 rooms) of the previous year and marks the highest number of annual transactions since the record-breaking year of 2015, which saw 57 deals and 10,600 rooms changing hands.

The majority of deal volumes were concentrated in the three Eastern Seaboard states, with New South Wales leading the way, accounting for 32 percent of total volumes or A$779 million. Queensland followed closely behind, representing 23 percent (A$564 million), and Victoria with 19 percent (A$461 million).

Most major city markets observed positive year-on-year increases in investment volumes.

Adam Bury, Executive Vice President of Investment Sales & Head of Hotel Debt Advisory at JLL Hotels & Hospitality Group, noted: “Queensland emerged as a standout performer in 2023, recording its highest annual transaction volume since 2015 at A$742 million.

“This was fueled by strong domestic and offshore interest, a leading trading recovery in recent years, and significant investments leading up to the Olympic Games in the state’s South East.”

Bury added, “Buyer interest extended across numerous capital cities, including Sydney, Melbourne, Brisbane, Gold Coast, and Adelaide, showcasing the depth and breadth of investor demand within the market.”

Domestic buyers and local capital continued to dominate capital flows, constituting 79 percent of total investment volumes, approximately $1.93 billion, although many of these investors had offshore limited partners. Direct offshore investment accounted for 21 percent of total investment volumes, approximately $500 million, with notable contributions from Singapore-based groups like Invictus Developments, City Developments Limited (CDL), and Worldwide Hotels Group.

The first half of the year witnessed a significant portion of total transactional activity, attributed to an active end to 2022 and higher levels of investor activity before consecutive cash rate increases. Approximately $1.77 billion worth of deals were settled and exchanged during this period, comprising 73 percent of the annual volumes, including several notable transactions that concluded in the fourth quarter.

Gus Moors, Managing Director of JLL Hotels & Hospitality Group, highlighted, “In a strong indication of investor appetite for suitable opportunities, JLL finalised five of the market’s last deals for 2023. This included the largest-ever recorded single-asset transaction on the Gold Coast, the Sheraton Grand Mirage (A$192 million), as well as transactions in New South Wales, Queensland, and Western Australia.

Moors added, “Other notable transactions across the country included Melbourne’s Adelphi Hotel (A$25 million) and Fraser Place (A$32.4 million), along with portfolio sales such as Spicers Retreats (A$130 million) and Escarpment Group (A$115 million).

Peter Harper, Managing Director & Head of Investment Sales Australasia at JLL Hotels & Hospitality Group, emphasised the resilience and attractiveness of the Australian Hotel Market to investors. He stated, “The market continues to attract significant interest from global investors, particularly from Asian groups seeking to deploy capital in markets with strong fundamentals. Anticipating the upcoming year, there is a prevailing cautious optimism that a more certain underwriting environment and favorable trading conditions will sustain investor interest throughout 2024.”

Harper also noted: “The strongest interest will remain on aspirational assets and properties offering genuine upside through refurbishment and repositioning. Hotels suitable for the growing living sector through adaptive use or redevelopment will also remain in the spotlight. This sentiment is particularly evident in major city markets, expected to benefit from ever-evolving events calendars and a continued recovery in both international and corporate/MICE demand.”

To obtain a copy of JLL Hotels & Hospitality’s 2023 Hotel Transaction Overview, please contact Peter Harper ([email protected]), Gus Moors ([email protected]), or Adam Bury ([email protected]).

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