As the hotel market begins a well overdue upswing, the national trend of Asian hotel investors leaving the market and having their places filled by Australian investors may soon hit Perth.
As the hotel market begins a well overdue upswing, the national trend of Asian hotel investors leaving the market and having their places filled by Australian investors may soon hit Perth.
Hotel sales are usually conducted as off-market transactions, and analysts say the Sheraton, Duxton and Rendezvous hotels have all been feeling out the market for potential buyers.
With many hotels owned by foreign interests, the strength of the Australian dollar has been cited as an incentive for investors to sell and obtain significant capital growth, and trends show Asian investors are pulling out of the market, with Australian investors taking their place.
Of the 40 sales over $5 million transacted last year, 33 purchasers were Australian.
The Hay Street Holiday Inn was also put on the market this week, as part of a larger portfolio, and is expected to sell for upwards of $25 million.
Colliers national director of hotels Robert McIntosh said that hotel proprietors had lost confidence in their ability to perform in the past few years, and that last year was the most activity in national hotel sales for 15 years.
“Particularly in Perth, people are reluctant and extraordinarily nervous to increase room rates and, although there has been a slight improvement, things are now at a level they were 10 years ago,” he said. “The average room rates for four and five-star properties in central Perth were $130 in 1997, $116 in 1999, and $106 in 2002 – now they are at $108, so there has been a slight rise and we are expecting more improvement.”
With vendors showing a dislike to advertise and declare their intentions to sell, the hotel market involved a lot of off-market transactions.
Last year there were two major hotel sales in Perth: the Novotel Langley for $38 million and the Chateau Commodore for $6.5 million.
Jones Lang LaSalle executive vice president (hotels) Troy Craig said demand in Perth for rooms had grown 7.1 per cent last year compared to the national average of 4.7 per cent, and that the outlook was very good in terms of demand growth.
“In relation to the sales market, there is a very strong demand for well-located hotels, and the more astute investors are looking to buy into markets which are about to go into an upswing,” Mr Craig said. “A lot of Asian investors have moved out in the last few years – they have got their capital appreciation and sold when the dollar was high.”
Hotel consultant Alan Boys, who runs Hotel and Leisure Advisory, said the market had made a strong recovery this year since room rates peaked in 1997 and subsequently fell away.
“The market has had some destabilising events but demand and rates are picking up now – although in real terms, average room rates are still 25 per cent below what they were in 1997,” Mr Boys said.
“There is still a long way to go.”
With the corporate sector accounting for approximately 40 per cent of occupancy rates, when the resources market booms in WA, so does the hotel market, according to Mr Hay.
“What we are seeing at the moment is a result of the strong resources sector – as long as that keeps growing, there will be less of a dependence on the leisure market,” he added.
Seashells Hospitality Group managing director Paul King said there was no question that properly-run, well-serviced accommodation had taken business away from the major hotels and chains.
“The leisure market prefers serviced accommodation, and increasingly the corporate market does too – the major hotels are going to have to lift their game to get them back,” Mr King said.
New hotels are also being built or refurbished as Perth’s hotel market recovers from several years of struggling.
Hotels to be built in Perth include the Medina on Barrack Street, Burswood’s Holiday Inn and the Riverside Pier Hotel at the Barrack Street Jetty.
The Accor hotel group, which owns the Novotel and Mecure hotels, has recently spent $17 million upgrading the two.
Novotel business development manager Georgina Anning said the hotels were well overdue for refurbishment and had had a very buoyant start to the year.
