Australia's asset shortage drives acquisition spree

New hotel room supply in Sydney, Australia has driven declines in both occupancy, despite the increase in demand and hotel performance, according to a report from Horwath HTL Australia. 
Sydney, Australia
Image: kitkatty007 / Pixabay

A shortage of suitable real estate for hotel developments in key cities like Sydney, Melbourne, Gold Coast, Canberra, Auckland and Queenstown is behind a boom in acquisitions by top- and mid-tier hotel groups. According to second-quarter results from iPG’s quarterly Hotel Market Analysis report, these groups are now acquiring existing hotel businesses and established brands.
With a lack of suitable real estate, groups such as AccorHotels, IHG and Marriott International were among the top hotel groups making acquisitions of existing hotels with mid-tier international operators such as Prince Hotels and Minor Hotels Group, also partaking in acquisitions of established hotel brands to expand their portfolios.
iPG, an Australian advisory for high-net-worth Asian investors, expects buoyancy in acquisitions to continue for the remainder of the year, as the shortage of real estate is a long-term issue and will mean hotel targets continue to be hotly contested.

Launching its second quarterly Hotel Market Analysis report, iPG Group CEO Michael Gu noted Australia received 8.3 million international tourists year-over-year as of March, and that these visitors spent as much as $42.3 billion, up $2.4 billion. 

“These visitors spend a colossal 269 million nights in Australia during their travels,” Gu said. “This upward trend is showing no sign of abating and is resulting in a hotel buying frenzy in the absence of development opportunities.”

Virtual Roundtable

Post COVID-19: The New Guest Experience

Join Hotel Management’s Elaine Simon for our latest roundtable—Post COVID-19: The New Guest Experience. The experts on the panel will share how to inspire guest confidence that hotels are safe and clean and how to win back guest business.

Occupancy Rates and RevPAR

Although the end of the financial year is traditionally a flat period for the hotel industry, Canberra’s market recorded double-digit growth. Australia’s capital benefited from increased volumes of leisure tourism generated by food and wine destination travelers, coupled with the new international connections headlined by Singapore Airlines and Qatar Airways.

The leisure-dominant market of Gold Coast continued to reap the benefits from the Commonwealth Games at the end of the financial year with the city attracting events such as the Logies, Dally M’s and the returning RICS event.

The emerging markets of Adelaide and Canberra, while not exhibiting extraordinary levels of growth, instead highlight that well-balanced and diversified streams of business and tourism initiatives will lead to long-term sustainable growth of the accommodation and its surrounding markets.

Hotel Operators and Brand Acquisitions

The most dominant player in acquisitions was AccorHotels with its acquisition of the Mantra Hotels & Resorts portfolio. Already Australia’s largest hotel operator, the French giant received approval from the ACCC to buy the Mantra suite of brands, which includes the Mantra, Peppers, Breakfree and the Art Series collections.

Marriott opened two Four Points by Sheraton hotels in Docklands Melbourne and Broadway in Sydney. 

Japan’s Seibu Holdings, owner of Prince Hotels & Resorts, settled into its acquisition of the StayWell Hospitality Group from 2017, collecting the brands Park Regis, Policy and Leisure Inn, of which iPG owns its Sydney flagship hotel in, Park Regis City Central Sydney.

Chinese hotel operator, Artyzen joined the acquisition brand wagon and entered into a joint venture to roll out the European boutique hotel brand CitizenM throughout the Asia Pacific.

Suggested Articles

Demand came in 67,000 rooms lower during the week ended July 4 than the previous week, according to Jan Freitag, STR’s SVP of lodging insights.

The In-Seat Contactless Platform is meant to give guests touch-free control over food and beverage at hotel restaurants.

As the economy slowly begins to right itself, hotels can look toward an unexpected way to save on operating costs: their trash.