Time to fall back in love again with mid-market hotels

Mid-market hotels provided the foundations for Australia’s hotel sector until the 1980s, but after going out of fashion with investors, this sector has regained its shine.

In the past decade Australian tourism has witnessed a radical overhaul of its hotel inventory. Rightfully, most attention has been focused on the luxury and upscale sectors with outstanding new properties and international brands transforming cities across the country. 

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Prime regional destinations have also benefited from the upscale development boom with Cairns and Gold Coast boasting an impressive array of new hotels, while even the Sunshine Coast – which hasn’t had a 5-star international hotel opening since 1988 – is about to undergo an upscale hotel renaissance.

The concentration on high-end hotel development has come at the cost of Australia’s traditional hotel strength – the mid-market – but as investors and management companies seek new opportunities, mid-scale hotels in city and regional areas are gaining increasing attention.

Jerry Schwartz has always had a keen eye for a bargain in the mid-market and his recent purchase of the rather neglected Leura Gardens Resort is a textbook case of identifying a property with good bones in a prime location and investing resources to revitalise the hotel’s performance.

The 3.5-star hotel is typical of the growing attention by investors. It’s not an entirely new trend.

Over the past decade a wave of motels – often beachside – have been purchased and renovated, rather than bulldozed, to target the retro hotel boom, while also attending to guest comforts through indulgent room upgrades, high-quality restaurants and wellness services.

The trend began with motels such as Halcyon House in Kingscliff and Bannisters in Mollymook, with Rick Stein’s eponymous seafood restaurant a major attractor.

The Gold Coast saw the biggest action with 70s motels such as the Cheshire Cat, Shores and La Costa lovingly restored. The trend continued right down the coast from the Sunshine Coast to Victoria, including regional towns where renovated motels such as The Berry, The Oriana Orange, and Parklands Resort Mudgee have been renovated to find new audiences.

With city CBD hotel accommodation now well-supplied, regional accommodation will become a bigger focus especially as more Australians embrace road trip culture.

The burgeoning retiree market is heading out on the road and seeking much more than the humble motel of past. They are looking for distinctive accommodation that becomes part of the travel experience, while remaining affordable.

Strong mid-market investment activity

My colleague Joseph Sims has been reviewing the numbers, which show that while interest in mid-market hotel development has grown strongly over the past three years, institutional investment in the sector is still subdued.

His main findings include:

• Mid-market transactions (deals between $5m and $40m) totalled A$637.5m (across 39 deals) in 2024, which was 22 percent above the long-term mid-market average.
• Investment in the sector was largely from private investors, family-owned companies and owner-operators rather than institutional groups. Smaller investors were less reliant on the debt market and more likely to see individual opportunities in specific markets.
• Around 75 percent of transaction volumes in 2024 were from purchasers who already own one or more hotel assets, and this is a trend expected to continue.
• Mid-market transactions have been strongly weighted to NSW (40 percent), Western Australia (22 percent) and Tasmania (13 percent).

Source: JLL Research (Mid-Market classifies as deals between A$5m and ≤A$40m)

Last year, JLL’s Hotels & Hospitality Group undertook a survey (Mid-Markets Capital Tracker) of investors in the sector to get a detailed understanding of current requirements and future trends.

Respondents to JLL’s survey own more than $5 billion in mid-market assets, and 87 percent of existing owners in the mid-market sector responded that were looking to add and amalgamate more assets to their existing portfolio.

The level of buyer interest was indicated by 80 percent of respondees saying they planned to buy within the next twelve months, and 60 percent within the even shorter time span of six months.

The major takeaway from the JLL survey is that there is significant capital ready to acquire mid-market hotels that offer potential. In comparison to the larger-scale institutional hotel space, the mid-markets sector has been highly transactional, and we expect this to continue and intensify, translating into increased activity through 2025 and beyond.

Our specialist team has been very active in selling several notable mid-market assets, attracting significant enquiry levels and strong bids from a few different buyer types. Notable examples include the successful sales of the Great Eastern and Flag Motor Lodge in Perth and the Mantra Bathurst

Until the 1980s, Australia’s hotel industry foundations were built on mid-market hotels and motels. While the injection of significant international investment into Australian hotels over the past four decades switched the focus to the upper end of the market, the research suggests that the mid-market is ready to return to the spotlight.