These cities are tops for hotel deals in Australia

Sydney, Australia's business district.

Room rates in Australia are growing, and hoteliers are snapping up assets in prime markets. 

By the Numbers

Average rooms rates grew nearly 8 per cent in the year to January to $219.31 while demand rose nearly 5 per cent, according to recent STR data. “The 82.1 percent absolute occupancy level would be the highest for any January on record in the market,” the report claimed. 

Based on daily data from January, Sydney alone saw substantial improvements year-over-year across a range of metrics. Supply increased by 3.6 percent, demand increased by 4.8 percent, occupancy grew by 1.1 percent to 82.1 percent, ADR increased by 7.8 percent to $219.31 and RevPAR grew by 9 percent to $180. 

"While Sydney’s growth in ADR was notable, the 82.1 percent absolute occupancy level would be the highest for any January on record in the market," STR reported. The company's analysts noted that the occupancy levels for the month were particularly impressive given that Sydney has experienced significant supply growth. 

In JLL's recent Hotel Investment Outlook report, the company said that "new stock" across Australia is "certain to place pressure on room rates in Brisbane and Perth. However, in Sydney and Melbourne, where occupancies have neared the 90 percent mark in 2016, expectations are for the new supply to be more than matched by tourism demand." 

Top-tier cities in the country are expected to dominate the market. "More specifically, we anticipate Sydney’s robust fundamentals will see elevated activity in both the churn of existing hotels and new-build opportunities, while Auckland will start to see opportunities for new supply within three to five years. Queensland leisure markets such as Cairns and the Gold Coast are in demand as airline capacity and the low Australian dollar stimulate domestic and inbound travel, which has translated into solid trading performance."

Recent Deals

Australia has seen a glut of deals announced in the last few months alone. Just weeks ago, W Hotels Worldwide revealed plans to open the W Melbourne in 2020. Japan’s Daisho will reportedly pay about $235 million for the hotel as part of a partnership with Cbus Property.

This will be the brand's second Australian hotel, following the W Brisbane, which is scheduled to open its doors in 2018.  

The day before that deal was announced, Melbourne-based developer Golden Age announced that it would sell the Sheraton Hotel Melbourne for as much as $140 million

In October, Shenzhen-based Han’s Holding Group filed a development application with development manager Touchstone Partners for a mixed-use project worth nearly $500 million in Sydney. 

And Singapore's Royal Group is reportedly selling the 140-guestroom InterContinental Sydney Double Bay, expecting to get $150 million for the hotel. Royal Group Holdings bought the property for about $58 million in mid-2013.

Craig Collins of JLL pointed out that after a string of major deals in 2015, an opportunity like this in Sydney was rare. 

“The InterContinental Sydney Double Bay is the first five-star hotel in the city to be offered to the market since the record-breaking Westin Sydney transaction took place in 2015,” he told the Australian.