Australia's hotel property market is fast returning to health on the back of increased demand from both domestic and foreign investors.
A declining exchange rate has heightened the appeal of Australian hotel properties for cash-flush Asian investors – in particular members of China’s burgeoning nouveau riche class eager to acquire assets abroad.
According to figures from JLL, Chinese buyers comprised over a quarter of demand for Australian hotels in 2014, accounting for 28 per cent of the total market share.
According to Mark Durran, JLL hotels and hospitality managing director of investment sales, Chinese investment in Australasian hotel properties is set to surge even further this year, rising to as much as half of all transactions in the sector in 2015.
Queensland in particular is expected to become a popular target for Chinese investors as a result of the appeal of its balmy climate for Asian tourists.
This in tandem with purchases by extremely affluent individuals and increased activity amongst hotel operators will boost a market that has been sluggish since the GFC.
While foreign interest in Australia’s hotel market has surged, JLL’s figures also indicate that domestic investment has risen even more sharply, from 22 per cent in 2013 to 46 per cent last year.
The sale of Sydney’s Sheraton on the Park by erstwhile US-based owner Starwood to China’s Sunshine Insurance for $463 million towards the end of last year was the largest single-asset hotel transaction in Australia’s history.
At the time, JLL said that the sale was a “milestone transaction for the Australian hotel industry,” demonstrating the strength of demand from Asian investors for Australian hotel assets in hot spot markets.
Other major hotel transactions in 2014 included the sale of Melbourne’s Park Hyatt to Hong Kong’s Fu Wah International Group at the start of the year, and the sale of Sofitel Wentworth Hotel in Sydney – one of the city’ most popular accommodation spots for members of the Liberal Party, to Singapore’s Frasers property group for $202.7 million.
Aside from mainland China, figures from Colliers International indicate that other major sources of foreign investment for the hotel sector include Hong Kong and Singapore.
Two other key sources of foreign capital – Japan and the US – are noteworthy for their absence from market activity over the past several years.