Offshore Billionaires Set to Check-In for Aussie Hotel Binge

The post-pandemic global travel splurge is in full flight and high-flying foreign investors are forecast to check into Australia’s hotel assets bolstering a multi-billion-dollar investment binge this year.

Longstanding Asian investors and the region’s rising ranks of billionaires are expected to target quality hotel assets, particularly in the major gateway cities of Melbourne and Sydney.

According to market forecasts from Colliers, transaction volumes are predicted to exceed the long-term average of $1.66 billion, with about $2.2 billion of expected deals in 2023.

Its latest research shows that after a two-year hiatus while international borders were closed, offshore capital in 2022 reached well above the pre-pandemic average investment level of 50 per cent, ensuring a strong year for the national hotel market.

Of last year’s $2.14 billion in total transactions, foreign investment accounted for more than 60 per cent.

Colliers’ Australian head of hotels, Karen Wales, said inquiry and activity from offshore groups had ramped up in the second half of the year, as Australia’s relative stability took centrestage in a turbulent global economic landscape.

“That uptick in transaction activity in the fourth quarter provides a promising base for increased activity in 2023, with more assets expected to be brought to market throughout the year.” Wales said.

“Although higher interest rates are likely to have an impact on pricing, this should be somewhat offset by further income growth, particularly in Sydney and Melbourne and as more market segments recover.”

Last year, 45 per cent of the market activity was in Sydney across 10 deals, with more assets in play.

▲ Quality hotel assets, particularly in the major gateway cities of Melbourne and Sydney, are the target of foreign investors.

“Buyers are chasing quality, newer construction or those that were recently renovated, while moving away from aged or underperforming assets,” Wales said.

“In many ways, this supports overall industry valuations, as the impulse right now, with a strong assist from the brands, is for property remodels and conversions, as opposed to languishing portfolios of hotels.”

Investment funds accounted for 49 per cent of high value deal flow in 2022, while private buyers and owner-operators comprised the remaining 41 per cent of the total transaction volume.

Singaporeans were the most active investors last year, as the Australian dollar hit a low in October against the Singapore dollar.

According to Wealth-X’s 2021 Billionaire Census, Asia’s billionaire population increased by 16.5 per cent in 2021.

“An explosive growth of wealth and a proliferating network of contacts is expanding direct investment opportunities for Asian families, many of whom have a strong affiliation with hotels,” Wales said.

“We expect to see the greatest activity from long-standing Asian investors in 2023, particularly from Singapore and those who do not require significant leverage and see long-term value in Australian hotels amidst the strong trading recovery and displaced capital markets.

“Motivated all-cash buyers or low leverage buyers may win the day in the present financial environment, as well as those buyers who are creative with their capital structure.”