Asian investors keep buying Australian hotels

(Rydges Esplanade Cairns)

A little less than a year ago, we suggested that 2016 could be “the year of the Chinese buyer” in Australia. Those predictions have turned out to be fairly accurate. 

The first nine months of 2016 saw about $1.7 billion of hotel transactions take place in Australia, including the $700-million Zhengtang Group investment into Sydney’s Ribbon development. High occupancy rates, a benign supply outlook and increased air capacity from key markets like China and India mean that hotels are likely to keep proving profitable. 

New research from CBRE indicates that Asian investors pumped $8.2 billion into the local hotel market over the past eight years, considerably more than the $3.2 million forked out by locals. “For the ninth year in a row, Asian investors are set to be the dominant players in the Australian hotel market,” CBRE hotels national director Wayne Bunz told The Australian.

Bunz said that $550 million worth of the $600 million of hotels sold in the third quarter was acquired by Asians drawn by attractive yields, steady growth, transparent political/legal frameworks and liquidity.

Major hotel deals negotiated earlier this year include Greaton’s (formerly Zhengtang) purchase of Sydney’s IMAX site in order to build a six-star hotel tower. 

Sydney's Park Regis Hotel, meanwhile, was sold for $34.70 million to an unnamed new owner who purchased the property through its operating company, Melbourne-based financial planning company Cornerstone Capital, from Sydney-based private hotel Staywell Hospitality Group. 

The Appeal of Cairns

Notably, quite a few transactions in the third quarter occurred in north Queensland, including the sale of the Novotel Oasis in Cairns, which sold to Shakespeare Property Group for $48 million, and the Rydges Esplanade Cairns, which sold for $40 million to Mulpha Group in September. That deal brought total Cairns hotel transactions to more than $230 million in past 18 months.

In July, Bunz said that the Cairns is the leading hotel market in Australia as a result of record international and domestic visitor numbers. In the first seven months of the year, domestic arrivals at Cairns Airport increased 5.2 percent, and international arrivals increased 8.5 percent. In the 12 months ending July 2016, STR reported that average hotel occupancy in Cairns rose to 82 percent, average daily rate increased 7.4 percent and RevPAR rose 14 percent to $109.74.

This also follows a strong 2015, when hotel sales—driven by Asian buyers—reached nearly $2 billion in the first half of the year, up 150 percent.