Q Hotel Market Analysis

Transcription

1 Q Hotel Market Analysis Chinese investors lead acquisitions

2 INTRODUCTION The Australian hotel market had a strong end to 2017 and start to 2018, with the eastern seaboard states of New South Wales, Victoria and Queensland displaying solid growth and fundamentals. Tourism Overview: Inbound Action Australia received 8.8 million international visitors 1 in the year to December 2017, representing a 6.6% increase on the previous year. Last year, Australia welcomed 1.35 million Chinese visitors, with this group overtaking New Zealanders to become Australia s largest inbound visitor segment, highlighting China s importance to Australia. The number of Chinese outbound tourists reached million 2 in 2017, so Australia has captured just 1.04% of this market, indicating potential for a rise in market share in the future. Looking forward, Tourism Australia has identified India as a key emerging market, with a rapidly-growing number of arrivals from this country. But it s worth noting just one carrier serves the India to Australia route, versus nine airlines that fly between China and Australia. 1 Tourism Australia YE 2017 arrival statistics 2 Nielsen Chinese outbound report ipg Q Hotel Market Analysis - 2 -

3 Australia Hotel STR Snapshot Year to Date 2018 Darwin 66.2% Darwin $ Cairns $ Cairns 81.7% Brisbane 70.2% Brisbane $ Gold Coast $ Gold Coast 74.5% Perth 77.0% Adelaide 81.8% Melbourne 87.4% Sydney 88.9% Canberra 77.1% Perth $ Adelaide $ Melbourne $ Sydney $ Canberra $ Hobart 88.5% Hobart $ Australian City Occupancy Rate (%) Australian Average Daily Rate ($) Year to Date (January - March 2018) 1 PROPERTY Occ % ADR RevPAR Percent Change from Occ ADR RevPAR Room Rev Room Avail Room Sold Sydney Centre Melbourne Centre Brisbane Adelaide Cairns Area Gold Coast Perth Darwin Area Canberra Parramatta Hobart Area Sydney Airport STR Global ipg Q Hotel Market Analysis - 3 -

4 Monthly Results January: Numbers surprise on the upside The hotel sector returned a strong result for the first quarter, with major tourist destinations recording year-on-year growth. For instance, the Gold Coast hotel market achieved an average daily rate (ADR) of $240, up by 4.7% compared to last year s result. Occupancy rates in the Parramatta and Sydney Airport hotel markets held ground during a period that is usually slow for both sectors. Parramatta benefitted from visitors to Homebush Olympic Park going to Ed Sheeran and Bruno Mars concerts during the month. Current Month (January 2018 vs January 2017) 1 PROPERTY Occ % ADR RevPAR Percent Change from January Occ ADR RevPAR Sydney Centre Melbourne Centre Brisbane Adelaide Cairns Area Gold Coast Perth Darwin Area Canberra Parramatta Hobart Area Sydney Airport STR Global ipg Q Hotel Market Analysis - 4 -

5 February: Sydney market full The Gold Coast hotel market achieved an ADR of $240, up by 4.7% compared to last year s result. During the month Sydney s occupancy rates declined, although ADRs rose. This shows the Sydney market is at capacity, giving hoteliers the ability to yield manage their rates. The February uplift in the Sydney market should continue through to March, and ADRs are forecast to hover around $300 across all star grades of hotels. The Brisbane market appears to have stabilised, recording steady ADR growth. There is further supply expected with the opening of W Brisbane and the Rosewood and Ritz casino hotels. Whilst supply is rising, the market is likely to be supported by heightened demand from an anticipated return of the mining sector. The Perth market continues to trend downward, and this dynamic is expected to continue through 2018 and into 2019 before any recovery may be expected. The Hobart and Sydney Airport markets, with an already-healthy supply of rooms, will be impacted by further hotel developments mooted to be in the near term pipeline. Current Month (February 2018 vs February 2017) 1 PROPERTY Occ % ADR RevPAR Percent Change from February Occ ADR RevPAR Sydney Centre Melbourne Centre Brisbane Adelaide Cairns Area Gold Coast Perth Darwin Area Canberra Parramatta Hobart Area Sydney Airport STR Global ipg Q Hotel Market Analysis - 5 -

6 March: Mixed results across Australia Sydney Sydney s March occupancy rates retracted compared to previous years, although this was offset by a higher ADR. This signals a continuing surge in demand, offset by a dearth of CBD hotel supply. With few hotel developments in the pipeline, additional supply may come from the cooling residential market, with an opportunity for developers to revise their plans to incorporate hotels in some projects. Brisbane Brisbane s occupancy rates retracted 5% during the month, with a moderate increase in ADRs compared to the previous year, which may signal the market is recovering. This is in part due to rising commodity prices creating demand from mining and resources businesses, with China s One Belt Road initiative driving demand for iron ore. Gold Coast occupancy rates have been steady at around 74%, however ADRs were up by more than 10% as a result of the Commonwealth Games. Melbourne During the month, Melbourne occupancy rates retracted compared to previous years, as additional supply came online with the opening of Four Points by Sheraton Docklands and Novotel South Wharf. Subsequently, ADRs in that market have compressed and further downward pressure is expected in the short to near term before the market stabilises as new supply is absorbed. Melbourne has a good track record of being able to absorb new supply, thanks to the large-scale events it hosts such as the Formula 1, Melbourne Cup and Australian Tennis Open. With limited new supply in the near term in Sydney s development outlook, Melbourne will continue to be the beneficiary of Sydney s demand overflow, with additional direct international flights announced to the city to take advantage of Melbourne airport s 24-hour capability. Event-driven demand has helped support the Brisbane market as it has weathered the resources sector slowdown over the past few years. The Commonwealth Games and concert events are expected to lead to an uplift in the first quarter of Star Entertainment Group s planned new casino, with a 2022 estimated completion date, should support the Brisbane market in the future. Gold Coast New supply in this market will be supported by the 300-room Jewel project, recently sold by Dalian Wanda to the Yuhu Group, and the 80-room extension of The Star Casino. Although it s understood a number of mooted development sites have been shelved. ipg Q Hotel Market Analysis - 6 -

7 Perth Perth occupancy rates have recovered slightly, however ADRs have continued to decline as existing hotels aggressively compete for business. Continued pressure on room and occupancy rates is likely thanks to new supply coming onto the market. Hobart The Hobart market experienced a significant decline in both occupancy rates and ADRs, as the market corrected following historic highs in President Xi Jinping s visit, along with Tasmania s natural scenic attractions, bolstered tourism arrival numbers, particularly from Chinese tourists. Domestic arrival numbers have also risen, signalling further buoyancy in the market. Current Month (March 2018 vs March 2017) 1 PROPERTY Occ % ADR RevPAR Percent Change from March Occ ADR RevPAR Room Rev Room Avail Room Sold Sydney Centre Melbourne Centre Brisbane Adelaide Cairns Area Gold Coast Perth Darwin Area Canberra Parramatta Hobart Area Sydney Airport STR Global ipg Q Hotel Market Analysis - 7 -

8 Hotel real estate and transactions With 482-rooms, the sale of the Watermark Hotels in Surfers Paradise and Brisbane has been the most notable hotel transaction over the past two months, with these properties purchased by ipg s joint venture partner, SB&G. Another notable transaction was the Sheraton Melbourne, which sold for $135 million to Qatar Airways, representing $775,000 per key. The combined Mercure & Ibis Brisbane properties were sold to German fund, Commerz Real, for $77 million. On a counter cyclical strategy, Novotel Perth was sold in the middle of 2017 for $80 million at $316,000 per key to Singaporean group M&L Hospitality. This follows a handful of other Singaporean groups entering the Perth market that have picked up Perth s Mandurah Hotel and the Holiday Inn City Centre Perth. Fullshare s purchase of a portfolio of North Queensland hotels, including the landmark resort Sheraton Grand Mirage Port Douglas, was a highlight among acquisitions made by Chinese investors. Nanshan Group s acquisition of the Pullman Mascot and Riverside Oaks golf club properties are other significant deals made by Chinese investors. Shanghai United s purchase of the InterContinental Double Bay for $135 million highlighted the lack of hotels for sale in the Sydney CBD market, and placed further downward pressure on Sydney s capitalisation rates. 482 Rooms Watermark Hotels in Surfers Paradise & Brisbane ipg Q Hotel Market Analysis - 8 -

9 Transaction Table PROPERTY LOCATION STAR NO. OF ROOMS PURCHASER PRICE PER ROOM $ PRICE Watermark Hotels Surfers Paradise & Gold Coast Holiday Inn City Centre Perth Gold Coast SB&G Hotel Group (Salter Brothers & Gu) Perth Legend Land Perth (Singapore) $186,722 $90,000,000 $349,462 $65,000,000 Aria Hotel Canberra Aligned FM $273,438 $35,000,000 Emporium Hotel Brisbane Ovolo/Hind Hotels $392,156 $40,000,000 Ibis Brisbane Brisbane Commerz Real $186,441 $36,169,554 Mercure Brisbane Brisbane Commerz Real $186,441 $40,830,579 Sheraton Melbourne Melbourne Qatar Airways $775,862 $135,000,000 Adina on Flinders Melbourne Shakespeare Property Group $830,769 $54,000,000 Aurora Melbourne Central Melbourne Ascendas Hospitality $476,190 $120,000,000 Pullman Sydney Airport Mascot Nanshan Group $366,812 $84,000,000 Sheraton Mirage Resort Port Douglas Port Douglas Fullshare Holdings $204,761 $60,200,000 Novotel Langley Perth M&L Hospitality $316,205 $80,000,000 Four Points by Sheraton (Turn-key development) Hilton Melbourne Convention Centre InterContinental Sydney Double Bay Broadway Schwartz Family Company $525,252 $156,000,000 Melbourne UOL Pan Pacific $631,868 $230,000,000 Sydney Shanghai United $966,429 $135,300,000 Quality Hotel CKS Mascot Australia Ao Bo Assets Management $264,462 $32,000,000 W Hotel, 447 Collins St, Melbourne Melbourne Daisho Group $748,299 $220,000,000 Crowne Plaza East Perth East Perth Asian investor (Sentosa) $264,550 $50,000,000 Sheraton Grand Mirage Resort Novotel Melbourne Glen Waverley Gold Coast Star Entertainment $476,190 $140,000,000 Glen Waverley iprosperity Group $368,333 $73,666,667 ipg Q Hotel Market Analysis - 9 -

10 Developments: Tight Sydney supply, Melbourne market active Sydney remains the most significant location for investors and developers, and a lack of available hotel stock continues to drive demand in a tightly-held market. As a consequence, buyers have sought forward purchase agreements on hotel developments, with the Four Points by Sheraton Central transaction an example. The following table highlights the lag in Australia s hotel development pipeline for Accommodation room supply 4 : City Rooms Sydney CBD 23,057 Melbourne had the highest number of transactions as developers look to capitalise on completed projects, demonstrated by the Sheraton Melbourne sale and the forward purchase sale of the W Hotel by Marriott International on Collins Street development. An emerging trend in Sydney and Melbourne is developments converting from residential to hotels 3 as the housing market cools. This should help the hotel market meet burgeoning demand for accommodation. Fears of an oversupply in Melbourne have been downplayed by industry analysts, as in the past the city has demonstrated a stellar track record absorbing new hotels with its robust events and sporting calendar. Melbourne Brisbane Hong Kong Singapore London New York 19,819 18,804 73,000 67, , ,000 Capitalisation Rates Hotel Yields (2017/2018) Student Accommodation Yields (2016/2017) 6-7% 6-7% 7-7.5% 7-7.5% 6.5-7% % % 4-5% % Sydney Melbourne Brisbane Gold Coast Perth Adelaide Sydney Melbourne Brisbane Source: Savills Source: Savills Office Yields (Qtr ) Industrial Yields (Qtr ) 5.5% 5.5% 6.88% 7.2% 6.38% 5.37% 6.18% 6.44% 6.75% Sydney Melbourne Brisbane Perth Adelaide Sydney Melbourne Brisbane Perth Source: Colliers International Source: Colliers International 3 Property Council of Australia 4 STR Global ipg Q Hotel Market Analysis

11 Company Profiles Raymond Tran Hotel Investment & Asset Manager Sydney, Australia Raymond, an experienced hotelier and real estate executive has over 20 years of hotel accommodation operations and real estate experience, serving five of those years in the capacity of General Manager followed by Executive Management roles. Raymond s career span included tenures with major international hotel groups which included Starwood, Fairmont & Raffles, Delta, Stamford, Choice, Seasons, Oaks and Accor. In his time with Colliers International, Raymond specialised in hotel brokerage, asset management and advisory and had achieved approx. $307m of transaction sales across Australia, including a variety of high profile operator selections. James Weaver Head of Property Melbourne, Australia James is Head of Property for ipg, where he applies more than 25 years cross-disciplinary experience in the property sector which included tenures with institutional groups including Charter Hall, Macquarie Bank and Freehills. James versatility stems from his proficiency as a property lawyer, with his tenure extending into asset management, property capital transactions and funds management. In his time with Macquarie Bank, James total portfolio was in excess of $1 billion in capital value under his management. CONCLUSION Expect continued buoyancy in the hotel real estate sector for the remainder of Sydney and Melbourne are likely to continue to be the markets with the highest activity levels and strongest ADRs, while Brisbane will also experience improving market conditions. Overall, a positive environment for assets and investors in the sector. ipg Q Hotel Market Analysis

12 iprosperity Pty Ltd does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. iprosperity Pty Ltd will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material iprosperity.com