Analysing the Recent Performance of the Hotel Sector

Following Melbourne’s world leading lockdown stint, which upended everything from intrastate to overseas travel, the local hotel sector has emerged as one of the most resilient asset classes in the past 24 months.

And according to recent research released by our contemporaries at JLL and Colliers – it is raising the eyebrows of investors all over the world looking to diversify their property portfolios.

Recent market performance

Data from JLL’s Hotel Investment Insights – Asia Pacific report, which analyses market activity and trends across the sector, revealed in October last year that over $2 billion in hotel deals were forecasted for transaction in 2022.

This equates to over an eighth of the forecasted sales activity in the Asia Pacific region during the period ($15.8 billion in transactions) – a significant portion in the context of the region’s broader hotel industry.

Furthermore, in 2022 Melbourne trumped all capital city markets in Australia for new hotel openings – for a second consecutive year – adding over 1,400 rooms in the city and 462 rooms in the broader metropolitan ring, Colliers’ Australian Accommodation Update 2022 found.

What is contributing to the market’s climb?

Much of the interest and sales activity being generated within the hotel sector is stemming from future development potential, whereby an investor acquires a property with the intention of refurbishing it in the medium- to long-term.

This has several positive knock-on effects for owners, as hotel properties are usually located in sought-after areas, given they need to appeal to people looking for conveniently positioned accommodation, which helps to underpin the appreciation of the investment in the short-term.

Hotel room rates can also be adjusted up or down to suit different market conditions, like seasonal travel periods and major events like Melbourne’s ‘Mad March’ which is packed full of world-class activations including the Grand Prix, the AFL season launch and the Melbourne International Comedy Festival.

Recent Jones Real Estate hotel deals

Our experienced sales team has been able to transact several industry-leading and high-profile hotel deals since our agency’s launch in 2019.

Many of these transactions have been achieved off the back of our keen commitment to digital and social media marketing, which helps us drive an average of 90 high-quality leads per campaign and has supported our high level of sales conversions in this vertical.

In 2020 during the peak of Melbourne’s lockdown, this utilisation of progressive social and digital media marketing allowed us to manage a sales campaign for the 107-room Rydges on Swanston hotel – which sold for $35 million – even as strict social distancing measures prevented property inspections and public auctions.

In another landmark transaction, last year our team managed the sale of the 99-room West End Hotel for $33,050,000 million on behalf of our associates Trenerry Property, Victor Smorgon Group and the Kanat Family.

If you would like to learn more about the broader hotel sector, current and emerging investment opportunities in the space, or would like to discuss a separate property matter, please reach out to us at info@jonesre.com.au.