could 2019 be the year of the hotels?

could 2019 be the year of the hotels?


February 2019
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Could 2019 be the year of the hotels?

It’s been an interesting start to the year in the hotel sector, with a number of high-profile assets going under the hammer. Across the country, hotels and pubs are trading hands with an often-minimal net difference against their previous sale price.

The true health of the sector though should not be viewed simply by price gains or losses, but in the volume and organisational movements that indicate the potential start of a new era for hotels and hospitality assets.

The Chinese make a return to Queensland
Chinese investors were excitedly observed recently re-joining the Queensland market, securing two properties for a combined total of $22 million.

The larger of the two deals saw Chinese firm Tsaos International settling the purchase on a 113-room Cairns Queenslander Hotel for almost $15 million in December.

A separate Chinese investment group were responsible for the second hotel transaction, this time in Rockhampton. The four-star Travelodge Hotel was sold by the Tucker Box Hotel Trust, a joint venture between Mirvac and the NRMA, for between $6 million and $7 million.

The Rockhampton Travelodge was last sold in 2006 for $7.6 million. These sales could be an indication that international investors are of the belief that the market dip is currently, or close to, bottoming out.

NSW hospitality making waves
Sydney’s Coopers Hotel in Newtown marked the first hospitality sale for 2019, secured by Matt Williams of King Tide Hospitality Group for about $13.5 million. The pub was last sold in 2011, where it achieved a similar price despite delivering annual revenues of $4.7 million in the last financial year.

Sydney investment house Iris Capital, picked up three hotels in September last year for a combined total of around $30 million. Those secured include the Sydney Junction Hotel in Hamilton, the Gunyah Hotel in Belmont and the Argenton Hotel in Glendale.

Iris Capital’s Sam Arnaout led these acquisitions and followed them up with the purchase of Elemore Vale's Shaft Tavern in December for around $12 million. Over the past six to eight months, a noticeable trend has emerged across Newcastle pubs with at least six prominent venues changing hands, all to Sydney buyers.

Two separate Sydney investors struck up deals with the Belmont Hotel on Lake Macquarie and the Salamander Tavern in Port Stephens, reaching a combine $20 million through off-market campaigns.

The Belmont was picked up by Sydney publican Don Hodge who stated that, "we've been deliberate in searching for acquisition opportunities such as the Belmont Hotel, and given our ownership of the nearby ‘Warners At The Bay’, feel that there will exist some potential operational synergies."

HTL Property agent Dan Dragicevich, who was responsible for the sales of the Belmont Hotel and the Salamander Tavern, asserted that many experienced Sydney hoteliers are keen to explore “the many opportunities found in an area so close to Sydney."

"The major city markets will continue to enjoy greater prominence in terms of both volume and weighting, but the emergence of a patent appetite for A grade properties in significant regional markets such as Newcastle, northern coastal NSW and south-east Queensland has never been as strong."

Early big sales and confidence looking forward 
Lotana Property has recently offloaded the Austral Hotel in Mackay for $25 million, marking the biggest pub deal of the year so far. The hotel was picked up by fund manager Charter Hall.

Lotana previously purchased the hotel in 2013 for $19 million.

Tom Gleeson of JLL Hotels, was positive about the transaction which "represents the largest investment hotel sale in the last 12 months.”

CBRE released their 2019 hotel market outlook report, which sees a prevailing weaker Australian dollar catalysing an increase in domestic and international travel; with the hotel and hospitality sector set to benefit.

"Given our economic forecasts, we expect bias towards further AUD depreciation in 2019. Over the past decade, any year with AUD/USD currency depreciation of 10% or more was typically followed by a year of (on average) 5% growth in hotel nights occupied by international visitors; thus we expect more international visitors in 2019.

"International visitor nights are forecast to grow by 6.2% p.a. over the next three years according to Tourism Research Australia.

"Growth in visitors from China over the past decade has been phenomenal and China has displaced the U.K. as Australia’s most valuable market for leisure exports since 2013.

"A weaker currency will provide the additional benefit to local hoteliers insomuch that a greater number of Australians will travel nationally rather than internationally.”

 

*Image supplied, Coopers Hotel Newtown