Commercial & Industrial Property News Update

Australia - Offshore Hotel Buyers Set Record Sales Level In H1 2012

August 8, 2012

Lured by rising occupancy and room rates on the back of the mining boom, overseas investors snap up hotel properties at record-setting levels.

Foreign buyers accounted for 90% of all hotel acquisitions in Australia during the first six months of the year, said Jones Lang LaSalle (JLL).

Significantly, Asian companies - led by Hong Kong and Malaysia - featured prominently in the transactions which totalled AUD 990 million. Major Asian entities such as Shangri-La Asia Ltd, Starhill Real Estate Investment Trust and Langham Hospitality Group were highlighted for their activity, lured by rising occupancy and room rates in the country.

JLL said that the sheer domination in H1 by foreign investors in the hotel sector had not been seen since 2002. It added that the main reasons for the rising hotel sector performance are the mining boom and rising tourism levels.

With an estimated AUD 500 billion worth of resource investment projects in the pipeline, Australia is in the midst of the biggest resources boom in a century. This is boosting mining-related business travel to the country's biggest cities.

At the same time, the Chinese and the Japanese are leading a pick-up in tourism, which rose a seasonally adjusted 8.1% in June to 515,100 overseas visitors from a year ago, said Tourism Australia. By 2014, 13.3% of inbound tourists may come from China, up from 6.4% in 2011, noted Deloitte Access Economics in May.

Craig Collins, chief executive officer for Australasia at JLL, said that investors are preferring to buy hotels rather than build as construction costs are rising. "There are generally very few opportunities to gain a foothold in capital-city markets, so when they come up, the buyers pounce," Collins said. "When the cost to build is higher than the cost to buy, it's a good barometer for the buyers."

Shangri-La on June 22 said it bought the five-star Shangri-La Hotel in Sydney for AUD 330 million, and followed up with the purchase of the Holiday Inn in Brisbane for AUD 48 million in the same week. The purchase of the 563-room Sydney property overlooking the city's Opera House and Harbour Bridge gave the Hong Kong-based group ownership of the hotel it already managed for the Government of Singapore Investment Corp.

Meanwhile, its Brisbane acquisition will allow Shangri-La to introduce its four-star Traders Hotel brand in Australia when the 191-room property begins operating this month. The hotelier also plans to make further in-roads in the Australian market, which represents its third-largest market after China and US.

Spokeswoman Vivienne Gan said, "We're very optimistic about the hotel industry in Australia. The economy is strong, and there is an upward trend in domestic and international travel."

According to JLL, Sydney had the highest hotel occupancy rate among major Australian cities this year through June 30, at 84.5%. Melbourne and Perth had occupancy rates of 80.4%, with Brisbane at 78.5%.

Tags: Commercial real estate, Investment properties, Income properties

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