Hotel Repositioning Arms Race On as Pipeline Dries Up

At a construction cost of up to $830,000 per room, according to RLB research, hotels are close to unbuildable. Instead, investors and operators are rethinking existing hotel stock. Accor has been on a hot streak in South East Queensland, with the $4-million repositioning of its Mercure Clear Mountain into a five-star Peppers-branded resort and the transformation of the Pacific Hotel Brisbane in Spring Hill into a Mercure following investment under new owners. Accor Pacific chief operating officer Adrian Williams says that repositioning is increasingly becoming the go-to as new supply dries up. “[Repositioning] is being replicated across the city, which lifts the quality of hotel stock and builds momentum, optimism, builds traveller numbers and improves their experience. That will then attract more investment,” Williams says. ▲ Pro-invest oversaw the repositioning of the former Larmont Sydney by Lancemore into a Hotel Indigo. Pro-invest Group is a vertically integrated owner, operator and developer managing $3 billion in assets including 6000 hotel rooms across 30 assets. Chief operating officer Anthony Ursino says that the economics of delivering new accommodation have become “increasingly challenging”. But the demand for hotel rooms, especially in Sydney, is only growing. “That combination is accelerating investor interest in repositioning, adaptive reuse and more capital-efficient accommodation models,” Ursino says. The calculations behind hotel repositioning The other factor pushing repositioning, apart from the fact that it is much cheaper to revamp than build new, is that the product needs to match the increasing prices. Brisbane’s average daily rate (ADR) and revenue per available room (RevPAR) each rose 8 per cent in the year to March 2026, reaching $255 and $195 respectively, according to data from the Property Council of Australia. “We’ve worked closely with [the owners of Mercure Spring Hill] on investing smartly so they can hit the market at the level that the property is pitched at, which is that mid-scale market,” Williams says. And Accor’s competitors are taking this strategy on too, with IHG investing in its 319-room InterContinental Brisbane revamp, adding a new Argentinian grill restaurant and an Italian pasta and wine bar as well as refurbishing rooms. Pro-invest took the former Primus Hotel Sydney, itself an adaptive reuse of the heritage-listed 1939 Sydney Water Board headquarters, and repositioned it as the Kimpton Margot Sydney. It has also repositioned Hotel Indigo Sydney Potts Point and, most recently, voco Queenstown in New Zealand. ▲ Accor Pacific chief operating officer Adrian Williams: The repositioning of hotel assets is only accelerating. “We believe the most compelling opportunities today are not necessarily about building something entirely new,” Ursino says. “They are about recognising unrealised potential in assets that already exist and applying the right combination of branding, design, operational expertise and capital discipline to unlock it.” A repositioning can involve anything from a light refresh to a full renovation. An owner must identify the motivations behind a repositioning—is it an asset quality, a guest experience or a market positioning issue? “That diagnosis matters because a refresh, a renovation and a repositioning respond to different commercial needs,” Ursino says. “The repositioning may involve a move into a different market segment under a related brand, for example, our conversion of a Holiday Inn Express to a Holiday Inn on the Sunshine Coast, or a move to a more upmarket proposition, as with the repositioning of the Holiday Inn on Flinders Lane as Hotel Indigo Melbourne on Flinders.” Challenges of repositioning That’s not to say that because it’s the cheaper option, it’s the easier option, says Accor Pacific vice president, franchise Danesh Bamji at the opening of the Peppers Clear Mountain which, according to Accor, is Moreton Bay’s only five-star hotel. “Opening a new hotel is no easy feat. There’s only one thing more difficult than opening a new hotel, and that’s repositioning a hotel,” Bamji says. “Yesterday this hotel still existed. The team still existed. However, the expectation from today onwards is that it is completely different. It’s repositioned, it’s remarketed, and it’s a completely different product in the market. Starting with a new hotel, you’ve got a clean slate.” ▲ Pro-invest Group chief operating officer Anthony Ursino: Delivering new hotel rooms is challenging, but hotel demand continues to rise. Past guests, existing staff and a history in the market can all work against a repositioning. But it makes sense, especially when an asset is underperforming in such a supply-constrained, high-ADR market. Hospitality-led renovations have been high on the agenda. Mercure Spring Hill recently added the Parklands Social New York Deli &amp; Grill to its ground floor amenity. Pro-invest’s Queenstown revamp involved the reconfiguration of its Great Room into smaller activated zones featuring local artists and a show kitchen. “Guests increasingly assess the entire experience around their stay, from food and beverage offerings to design, community activation, wellbeing, technology and connection to the local destination,” Ursino says. The future of hotels in mixed-use precincts With only 5143 rooms under construction, according to CBRE, Australia is facing a dire supply shortage. Queensland is expected to fall 11,139 rooms short of what it needs by 2032—equivalent to 56 new hotels, assuming 200 rooms per venue. Sydney, meanwhile, has 1230 rooms scheduled for delivery by 2028, Ursino says, representing 4.6 per cent of existing inventory. So while repositioning helps to elevate existing assets and perhaps add a handful of rooms to the mix, the real issue of new supply is being handed to a different model—the mixed-use project. “We are seeing a blurring of retail, commercial, living and lodging. [Mixed-use] is the future of investment, not just in Brisbane but broadly across Australia,” Williams says. ▲ Accor opened a Novotel within the St Kilda Collective redevelopment, a partnership between Fortis, ERDI and Ondas. “And hotels are an important part of that because they can tie together a precinct,” Williams says. “They can create that hospitality experience that brings the pieces together.” And while we may see more repositionings ahead, he says, the new hotel rooms will be delivered in partnership with developers alongside other offerings. “We are very interested in that hybrid approach,” Williams says. “And we’re having lots of conversations and have things in the pipeline that are very much in line with that hybrid approach.”

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Clare Burnett
Mon 05 Oct 26

Hotel Repositioning Arms Race On as Pipeline Dries Up

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