Hotel operators and owners have defied the current market downturn to open a raft of new sites as they prepare for a rise in demand from domestic tourism and the introduction of new international travel bubbles.
Investors are still wary with the Colliers International’s recent hotel sentiment survey shows sentiment about trading conditions for the first half of this year slumped to its lowest level since the start of the crisis, at negative 31.3 per cent. Expectations are only slightly more upbeat for the second half of the year, with just 2 per cent expecting positive trading conditions.
On the upside, the survey identified that Sydney is likely to see the greatest upswing in positive trading from the third quarter of this year, stretching into 2022.
“Every time restrictions have been eased it has been another shot of confidence for the NSW economy,” Colliers said.
Solvency was identified as the biggest threat to the sector, while almost half of investors surveyed expect a fall in values of up to 10 per cent and another sizeable cohort expect an even greater 20-30 per cent decline.
But some investors are willing to take the opposing view, with Pro-Invest setting up a new $500 million fund and CK Ow’s Singapore-listed Stamford Land Corporation is bringing their portfolio of Stamford hotels around Australia to market.
The $1 billion price tag makes it the largest portfolio to come to market in more than a decade. There are suggestions a number of parties are showing interest as they predict an upturn in business.
The sector has been one of the hardest-hit by the global pandemic, with many city-based hotels closing their doors or being used as quarantine sites. At the height of the COVID-19 lockdowns hotels were close to 10 per cent occupancy and many just shut down.
In the latest Deloitte Access Economics Tourism and Hotel Market Outlook, Deloitte Access Economics partner and Deloitte national tourism leader, Adele Labine-Romain, says these have been and remain testing and uncertain times for tourism and hotel operators, who employ so many people and who are are so important to “brand Australia”.
“They were the first to be impacted by measures introduced by governments in response to COVID, and will be among the last to recover,” Ms Labine-Romain says in the report.
“Domestic demand will have to deliver in this recovery, with international tourism unlikely to return in a meaningful way until at least 2022, with the exception of the just-announced travel bubble with New Zealand in the first instance, and talk of the same in parts of Asia and the Pacific down the track.”
For operators IHG and Accor, the development pipeline that started before the global pandemic hit, is now coming to fruition with many hotels due to open in the coming year. TFE is also active and is due to open the new A by Adina in George Street, Sydney.
Leanne Harwood, managing director – Japan, Australasia & Pacific for IHG Hotels & Resorts, said the sector is still in one of the most challenging periods the industry has ever faced and there is a long way to go until it is back to where it was before the pandemic, especially in Sydney and Melbourne CBD hotels that are so reliant on corporate and event business.
“It is an absolute certainty that the hotel industry will bounce back better than ever in the coming years,” Ms Harwood said.
IHG will open the Holiday Inn Werribee, voco Melbourne Central, Holiday Inn Express Melbourne Little Collins, voco Brisbane City Centre and InterContinental Sorrento in coming months.
Accor has also been active with a swathe of new sites being opened, the most recent being the Mövenpick Hotel Melbourne on Spencer with Singapore’s Fragrance Group.
Accor Pacific chief executive Simon McGrath said he was delighted to open the new hotel, adding that with the domestic leisure market growing, Australia and New Zealand are well positioned to capture both domestic travellers and returning international travellers when the borders reopen.
In coming months the group will launch the Porter House Hotel Sydney – MGallery and a new hotel at 412 Pitt Street, Haymarket. In Melbourne it has the new Sebel Melbourne Ringwood and the Mercure Melbourne Doncaster.
Keep up with Commercial Real Estate news.
Keep up with Commercial Real Estate news.