This article is from the Australian Property Journal archive
SYDNEY hotel market has delivered a total return of 20.1% outperforming Melbourne which posted a return of 13% for the year ending December 2011, according to the PCA/IPD Hotel Index,
The index total return was 17.8% for the year ending December 2011 which represents an increase of 5.5% over the previous year’s result of 12.3% in December 2010.
The increase was driven by strong capital growth, rising from 3.5% to 8.3% and income return was up over the year by 0.4% to 8.9%.
IPD Australia and New Zealand managing director Dr Anthony De Francesco said the hotel sector has shown strong investment performance over the year.
“The strong investment returns reflects rising RevPAR as a result of persistently high occupancy rates due to low levels of supply and relatively strong demand.
“We expect the hotel property sector to continue to perform strongly over the remainder of this year given its strong space market fundamentals against core property sector markets,” he added.
Ryan Laywers principal Tony Ryan said 2011 proved a very strong year for the investment grade hotel sector with total returns increasing by nearly 50%.
“Capital growth was the principle driver reflecting strong fundamentals and a confidence in future cash flows. With domestic corporate demand still robust, CBD hotels are hard to beat,” he added.
Sydney’s market outperformed Melbourne, reflecting higher occupancy rates 85.5% for Sydney versus 79.4% for Melbourne and higher revpar, $182.3 for Sydney versus $148.3 for Melbourne.
All other hotel markets recorded occupancy of 79.4% and revpar of $142.90.
Jones Lang LaSalle Hotels managing director Troy Craig said the returns represent encouraging news for the hotel investment community and will ensure that Australia remains a key target for global and regional hotel investors.
“Transaction volume is expected to reach around $1.2 billion in 2012, representing an uplift of 20% over 2011 and slightly above the long term trend.
“More owners are expected to take advantage of the trading upswing and exit over the next couple of years. Asian buyers are expected to continue to dominate, although competition is increasing with a number of Middle Eastern sovereign wealth funds targeting acquisitions in the world’s most transparent real estate market,” he concluded.
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