
Regional markets lead pub and hotel recovery
Australia’s regions are leading a recovery in the pub and hotel sectors fuelled by domestic demand and infrastructure spending, industry leaders say.
“Regional areas have largely done well. They’re well and truly back above 2019 levels in terms of average daily rate, and occupancies are strong,” said Accor Pacific chief executive Sarah Derry.
“So it’s really now for me a story about the cities and the international visitors returning.”
This recovery, she said, was being affected by inbound international airline capacities and prices of fares. “These are obviously causing some challenges,” Ms Derry said.
Also key to bringing people back to Australia, and filling up hotels, is a busier events calendar, she said.
“It’s sporting events, it’s conferences and incentives. Those coming back will just put so much more money into the economy overall.”
Chris Cornforth, co-founder of Harvest Hotels, said regional pubs still offer good value despite recent record-breaking sales.
“I think The Oaks [in Sydney’s Neutral Bay] is a good example. That’s been mooted to sell for over $175 million or something wild like that,” he said.
“When we look at a pub like that, you buy that on a cap rate around 3 per cent, which for us isn’t hugely value accretive to our investors.
“When we look at other markets – where we’re finding a lot of the institutional capital is flowing – [is] into Adelaide, the Northern Territory, even regional NSW particularly. There’s certainly value there.
“For instance, we bought a pub in Wagga Wagga recently, and it was a record sale for Wagga or a regional area, which is always great to read from our investor point of view. That pub for us now we’ve made a few operational improvements, that’s mid-teen returns, 14 per cent returns that we’ll be getting.”
Asked when the hotel sector would return to pre-pandemic performance levels, Ms Derry said she expected this to happen by March next year.
“But if you take for example, Western Australia – I had the opportunity to be in Perth last week and spend time there. They’re already at 2019 levels at the moment. So we’re seeing really good recovery,” she said.
“Some cities like Adelaide and Brisbane are already back at 2019 levels,” said Jan Smits, Pro-invest Group CEO.
“But I’m one quarter behind Sarah, I think it will be the second quarter of next year [to return to pre-pandemic performance].
“I think the international [airline] capacity won’t be totally back till the middle of next year.”