Australian hotels are going strong this year, with national RevPAR up 3.6 percent during the 2015/2016 financial year. But according to Savills Australia, sector performance remains decidedly fragmented with key cities Sydney and Melbourne driving the market. Here are some top takeaways:
1. Sydney & Melbourne are on top
New South Wales, and Sydney in particular, ruled 2016, with average RevPAR in NSW topping Victoria during the year as NSW’s economy continues to lead the nation. Sydney recorded a 9.1 percent gain and Melbourne 1.5 percent, while Brisbane and Perth fell 4.5 and 4.3 percent respectively, Savills National Head of Capital Strategy Chris Freeman told the Urban Developer. Along the Gold Coast, occupancy rates grew by almost 3 percent, driving an average revenue rise of 7.5 percent.
2. Global investors are paying attention
Since those markets are the strongest, they’re also attracting the most investment interest from both domestic and international hotel buyers. “Demand for hotel investment opportunities is far outstripping supply, with arguably the widest geographical spread of buyers in Australian history seeking hotel investments in Australia,” Managing Director of Hotels for Savills Australia, Michael Simpson, said, adding that the investment market continued to be attracted to Australian hotels which had posted strong risk-adjusted returns.
Investors from Asia, the U.S., UK, and Europe have been “aggressively chasing new opportunities in Australia,” while hotel owners were reluctant to sell into those markets despite major deals making headlines.
3. Keep an eye on secondary markets
The Brisbane, Perth and Darwin markets are presenting themselves as “sound counter-cyclical” investment opportunities. “Debt remains cheap and readily available for hotel assets and there is a positive spread between the cost of debt and investment yields,” Simpson said.