In a comprehensive report released by Savills Australia and New Zealand, the Australian hotel market witnessed a significant uptick in transaction volumes, reaching approximately $2.494 billion in the 2023 calendar year. This figure represents a notable 6% increase compared to the preceding year, surpassing the long-term average of $2.1 billion.
The report, meticulously analyzing hotel deals valued at over $5 million throughout 2023, disclosed that despite the growth in total value, the number of transactions decreased by approximately 8.6%, with only 53 hotel deals completed. Factors such as rising interest rates and macroeconomic headwinds are cited as influencers impacting investment activity during this period.
Moreover, the report shed light on a noteworthy surge in the average deal size, soaring by 26.4% to reach $47.1 million. This increase is attributed to several larger ‘outlier’ sales that contributed to the overall transaction landscape.
Delving deeper into the data, the report highlighted that private investors and family offices played a dominant role, representing 58% of the total investment, while investment funds accounted for 30%.
The buyer landscape depicted a predominantly domestic scenario, comprising 73% of the activity, a significant jump from the approximately 50% in 2022. Singaporean buyers followed closely, representing 24% of the acquisitions. On the flip side, sellers were mostly Australian at 76%, with 24% being Asian-based owners.
Mark Durran, Managing Director of Hotel Capital Markets at Savills Australia and New Zealand, emphasized the enduring appeal of Australia for international hotel investors, particularly from Asia. Despite challenges, such as the scarcity of major investment-grade hotel assets, the Savills Asia Pacific team reported sustained interest from investors across the region.
As the report looks ahead to 2024, Savills anticipates a surge in cross-border capital deployment into the Australian hotel sector. Recent transactions, including the $96 million acquisition of the 273-room Four Points by Sheraton Melbourne Docklands hotel, signal a strong start for the year.
Mark Durran concluded,
“Looking forward to the year ahead, we anticipate similar levels of hotel transaction activity for both major single assets as well as portfolios driven by well-capitalized strategic investors seeking selective hospitality assets that fit with their investment objectives and hotel mandates, positioning their capital for continued recovery in both trading and investment markets.”
Nick Lower, State Director of Hotels at Savills Australia and New Zealand, added,
“This year, we anticipate significant transactional activity in both capital cities as well as in many key regional destinations. Melbourne and Sydney should be particularly active.”
The report’s findings align with the ongoing post-COVID recovery of the Australian hotel market, with December 2023 STR reports indicating robust year-on-year growth across key destinations. Sydney, in particular, led the way with a 29% increase in Revenue Per Available Room (RevPAR) for the calendar year 2023 compared to the previous year, supported by a 20% growth in average occupancy. Other major cities like Brisbane, Melbourne, and Perth also exhibited strong year-on-year RevPAR growth, according to Adrian Archer, National Director of Hotel Valuations at Savills Australia and New Zealand. The resurgence in international visitation further underscores the positive trajectory of the Australian hotel market.
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