Down Under is downright hot for hotel transactions and development.
Singapore-based Park Hotel Group has inked a deal to manage an upcoming hotel in Adelaide, Australia. The A$175 million Park Hotel Adelaide will be owned by LGB Corp, a real estate developer based in Singapore—with an office in Adelaide. It will also be Park Hotel's first Australian outlet.
Building is due to start in 2017, with completion set for late 2018. The delay in construction is reportedly due to an existing lease on the hotel site, which will expire only at the end of next year. The 30-story project in the city center will have 280 private residences, 250 guest rooms and suites, a restaurant, swimming pool and other facilities.
This is only the most recent development in Australia's booming hotel scene in the past several weeks. Just yesterday, we reported that U.S. REIT Host Hotels & Resorts and developer Plenary Group are looking to put the Hilton Melbourne South Wharf Hotel on the market. The pair will reportedly offer their stakes in the asset (the U.S. group owns 75 percent and the local player 25 percent) as a package, allowing a new owner to take full control of the hotel. Pricing is tipped at more than $250 million.
Sydney, meanwhile, is building its first five-star hotel in nearly two years at Darling Harbor with the $360-million Sydney Sofitel Darling Harbour Hotel. Notably, Accor does not believe this will not be the start of more luxury hotel development, because "most development sites in the city stack up better for development use." JLL, however, pointed out that in just under two years, Sydney has seen more than $1.5 billion in hotel sales.
In Victoria, several hotels went on the market earlier this month. Last month, a Perth-based joint venture bought the Pacific Hotel Cairns in a deal negotiated by JLL Hotels & Hospitality Group's Peter Harper and Paul Fraser. Ascot Capital and Stephen Lauder's Facilimate joined forces to buy the hotel after a campaign that attracted 100 inquiries with 10 formal bids. Sources reported that the deal reached an estimated $25 million.
Sales are reaching beyond the major urban hubs, as well. JLL Hotels & Hospitality sold the El Toro Motor Inn Hotel in Liverpool, 20 miles southwest of Sydney, on behalf of Lantern Hotel Group to a private family for around US$17 million in mid-July.
As the Sydney Morning Herald noted in mid-July, more than AUS$100 million of pubs and hotels have changed hands in the past seven months, ranging from suburban sites at the Northern beaches, and from Paddington to Liverpool.
There's a good reason for these strong numbers. According to CBRE Hotels' latest Australian Hotel Market Update, RevPAR grew by 3.4 percent across Australia's major hotel markets in the first half of 2015. "This trend reinforces the shift in Australia's economic activity away from a reliance on mining to a services-based economy," Ken Smith, regional director of CBRE Hotels Pacific, said in a statement. "The accommodation sector is forecast to continue to benefit from growth in both international and domestic visitor room night demand due to a lower Australian dollar, tourism initiatives and significant hotel development pipeline."
The northern Queensland city of Cairns is also seeing a "revenue surge" in its hotel industry, credited to strong investments and a "thriving" tourism industry. RevPAR for hotels and resorts along the Great Barrier Reef is $291.43, a 37.2 percent rise, while in Cairns it has grown 11.3 percent to $99.58. JLL Hotels and Hospitality Group chief executive Craig Collins said most major hotels had shown RevPAR growth, with Queensland leisure markets displaying the strongest.
CBRE Hotels' market update also highlights a notable tightening in investment yields, with a significant number of large transactions having been completed in the past 12 months on initial yields below 6.5 percent.
Australia transaction volumes in 2014 reached a record US$2.2 billion.