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Australia in the middle of hotel investment boom

October 2015

With more than USD 4.2 billion hotels transacting in the 12 months to June 2015, up 107% on the previous 12 months, Australia is in the middle of a hotel investment boom.

The Australian hotel market continues to be dominated by overseas investors who, according to Savills, purchased 54%, of hotel assets in the 12 months to June 2015.

Australia remains a safe investment destination due to its strong banking system, consistent and transparent investment market. The most recent significant hotel transaction in Australia is the Westin Sydney, which is due to complete on a passing yield of 4% and a cap rate of 4.5%. This is a compression in the cap rate of 250 basis points at the luxury end of the sector in just over 18 months.

Given the current strength of the key gateway markets of Sydney and Melbourne in average daily rate, occupancy and meetings, conferences and corporate clientele, it is reasonable to assume that the hotel investment boom will continue in Australia for the foreseeable future, says Savills.