CBRE: Australian hotels sales hit a five-year high after surging close to $2B

Australian hotels sales have surged to almost $2 billion this year—hitting a five-year high and up from just $681 million in 2020—despite a year of lockdowns and ongoing travel restrictions.

New CBRE Hotels data highlights that activity has been propelled by a wave of hotels being sold for residential and build-to-rent conversions in addition to major portfolio sales, including the $620-million sale of 11 Travelodge hotels by the Tucker Box Hotel group, and single-asset transactions such as the $315-million sale of the Sofitel Wentworth Sydney.

Troy Craig, regional director, valuation & advisory services, CBRE Hotels, said close to one-fifth of the 2021 sales by value had been to buyers planning conversions, with the activity putting this year’s sales tally on track to be in line with historic averages.

“That’s quite remarkable given ongoing border closures, with activity being underpinned in part by purchasers looking at opportunities to reposition existing assets to capitalize on the strength in the residential market and rising interest in build-to-rent opportunities,” he said. “We’ve also seen offshore-backed capital continue to pursue hotel investment opportunities, which has led to prices per room being close to pre-COVID levels.”

By far the biggest sale this year involved the national Tucker Box portfolio, which was acquired by Singapore sovereign wealth fund GIC, Swiss private equity firm Partners Group and Melbourne-based Bayview on the Park.

Conversions have been the other focus area, as highlighted by the $70-million-plus sale of Melbourne’s Bayview of the Park to Aware Super, the $125-million sale of Vibe Rushcutters for a residential conversion and the $178-million sale Intercontinental Hotel at Double Bay for a combined hotel and residential project.

“Developers are capitalizing on the continued strength of the residential market and the interest in build-to-rent opportunities to acquire well-located, fringe city hotels, which will likely have a slower recovery trajectory than CBD accommodation assets and have a higher and better use as residential given their location,” said Michael Simpson, managing director, capital markets, CBRE Hotels.

In a separate Hotel Outlook report, CBRE predicts that CBD hotel markets will return to 2019 performance levels in three to five years as lockdowns end and international travel recommences.

“While the RevPAR growth trajectory stalled in Australia after a promising start in H1 2021, this has provided reassurance that once the COVID shackles are removed pent up domestic demand will quickly translate into increased hotel occupancy, which will sustain and drive average daily room rates,” he said. “Restricted international travel will recommence next month and will gradually increase as reciprocal travel bubbles are initially established, which will inevitably lead to normal international travel routes and activity.”