Aussie hotels offer investment opportunities

Business Times: Tue, Feb 07

HOTELS in key Australian cities offer investment opportunities as strong demand from the corporate sector continues to bolster occupancies in business hotels, according to a director for Tourism and Transport Forum (TTF) Australia. Annualised total return for the year ended September 2011 came in at 17 per cent, said TTF Australia director Tony Ryan, citing a hotel property index by research firm IPD which covered 97 hotels in Australia. Boosted by rising room rates and high occupancies, annualised income return for the same time span worked out to 8.9 per cent while capital growth was 7.5 per cent. The index excludes resorts and motels, taking into account mostly business hotels. Performances of hotels within cities such as Sydney, Melbourne and Brisbane also paint a pretty picture, according to data from Dransfield Hotels & Resorts. Hotels in Brisbane saw revenue per available room (RevPAR) grow 10.5 per cent year-on-year for the three months ended September 2011, while hotels in Perth, Canberra, Sydney and Melbourne registered RevPAR growth of 20.9 per cent, 11.9 per cent, 5.1 per cent and 2.7 per cent respectively. At the same time, cities such as Hobart (-9.2 per cent), Darwin (-6 per cent) and Adelaide (-0.6 per cent) saw RevPAR dropping. Overall, Australia's hotel market posted a 4.3 per cent year-on-year growth in RevPAR for Q311 and a 6.4 per cent increase in RevPAR in Q211. Occupancies for Q311 in cities such as Sydney, Perth, Melbourne, Canberra and Brisbane range from 77-86 per cent. 'These are markets driven by (domestic) corporate demand, not necessarily inbound travel. For downtown CBD hotels, it has been an absolute boom-time,' he noted. 'We've had little or no new supply in the Australian market. What you've got is a very restricted market in terms of supply.' This year, Australia is expected to see about 6.06 million travellers, up 2.7 per cent from 2012, according to projections by Australia's Tourism Forecasting Committee. Growth in international visitor arrivals for 2011 was expected to be flat - partly due to the stronger Australian dollar - up 0.4 per cent to some 5.9 million - roughly half of the 12-13 million visitors that Singapore was targeting last year. 'Although we don't have the inbound numbers...we're having the demand generated domestically from business demand and we have no new supply,' said Mr Ryan, a lawyer by profession who specialises in the hospitality and real estate industries. Asian investors have typically hailed from markets such as Thailand, Indonesia and Singapore. The governments of states such as New South Wales and Victoria also plan to promote hotel development by dangling incentives, such as increasing the development area of a parcel of land if it is used for a hotel project versus other ones, he highlighted. However, for investors choosing to develop a hotel from the ground up, Mr Ryan also acknowledged that the lengthy approval and construction process in Australia may require some five to six years before the property is operational. And while hotel values have rebounded since the economic crisis in 2008-2009, Mr Ryan believes there is still room for further growth of existing properties. 'I think you're going to see steady asset growth between now and 2019,' he added.   Source: Business Times