Hotel sales to slow

AUSTRALIAN hotel sales are expected to slow in the year ahead as the market shift focus towards development over the next few years, according to Jones Lang LaSalle Hotels.

According to the JLL Hotels’ annual Top Owner Survey, in 2008 acquisition activity is expected to slow from the 2007 high of $1.63 billion.

 

JLL Hotels’ Asia Pacific chief executive David Gibson said despite strong growth in income performance and a high level of interest in the sector, he anticipates a gradual shift towards development over the next few years to meet the expected demand for hotel accommodation.

 

The Australian hotel development pipeline across 10 major markets is now at its highest level for some time – 6,700 rooms.

 

The survey also found that the top ten hotel owners have increased their room count by 24% since 2000, as a proportion of total room supply in Australia this has increased only marginally from 11% to 12% – in spite of over $9 billion of major hotels (with a value above $5 million) transacting over the same period.

 

Gibson said accommodation ownership is very fragmented and the introduction of serviced apartments, as well as the separation of ownership and operating companies, has only exacerbated this.

 

Across Australia there are 216,845 accommodation rooms with the Top 10 Owners accounting for approximately 12% or 27,209 rooms.

 

And whilst hotel operators are exiting the top 10 list, they are being replaced by Australian investment funds. Only three major players remain in the top 10 list when compared to 2000 – Babcock & Brown – run Tourism Asset Holdings Limited, Thakral Holdings and GPT.

 

TAHL continues to dominate the ownership of Australia’s tourist accommodation market with 40 hotels and 6,032 rooms – supported by its long relationship with Australia’s largest hotel operator – Accor Asia Pacific.

 

Whilst Australian funds and institutions dominate the Top Ten Owner list, The Schwartz Family Company is a private hotel investor rapidly expanding its portfolio.

 

“Following its acquisition of the Avillion Hotel Sydney during 2007, which added a significant 445 rooms to its portfolio, Schwartz jumped an impressive three spots and is now Australia’s sixth largest owner of hotels,” Gibson said.

 

Top 10 Accommodation Owners as at the end of December 2007
Rank	Owner	Investor type	Origin	Rooms	No. of hotels	2006 rank
1	Tourism Asset Holdings Limited	Private company	Australia	6,032	40	1
2	Mirvac Funds Management	Investment fund	Australia	4,362	22	6
3	Eureka Funds Management	Investment fund	Australia	2,726	10	2
4	Thakral Holdings	Public company	Singapore	2,547	8	3
5	GPT	REIT	Australia	2,406	21	4
6	Schwartz Family Company	HNWI	Australia	2,231	8	9
7	Toga Group of Companies	Hotel/SA operator	Australia	2,029	14	7
8	Stamford Land Corporation	Hotel/SA operator	Singapore	1,764	7	5
9	Crown Ltd	Public company	Australia	1,651	4	10
10	Abacus Funds Management	Investment fund	Australia	1,461	7	18
Source: Jones Lang LaSalle Hotels

 

A separate JLL Hotels Top Operator Survey has found hotel operators who have developed serviced apartment product as a preference over hotels have been more successful at growing their portfolio in recent years.

 

In 2007, Australia’s largest hotel operators, Accor Asia Pacific Corporation and Stella Hospitality Group both increased rooms under management by concentrating on the serviced apartment sector – both primarily in the 4-star arena.

 

JLL Hotels’ senior vice president Gus Moors said AAPC has 18,591 rooms under management – up 11% during 2007 with Stella increasing rooms under management by 27%.

 

Owner	Rooms	Properties	Growth	2006 rank
Accor Asia Pacific Corporation	18,591	133	10.9%	1
Stella Hospitality Group	15,765	112	26.9%	2
InterContinental Hotel Group	8,236	34	1.2%	3
Amalgamated Holding	5,432	31	25.1%	6
Quest Apartments	5,`69	105	32.5%	8
Toga Hospitality group of companies	5,065	40	-0.6%	4
Mirvac Hotels and Resorts	4,753	34	3.0%	5
Constellation Hotel Group	3,576	60	31.5%	13
Oaks Hotels and Resorts	3,5`4	28	-10.7%	7
Starwood Hotels and Resorts	3,219	9	3.2%	10
Source: Jones Lang LaSalle Hotels

 

Moors said with 87,000 motel rooms across Australia accounting for 40% of the total accommodation market, there is huge potential for quality brands to add value within this sector.

 

The addition of a brand can make a considerable impact on the cash flows for operators and owners alike.

 

“Significant advantages by way of increased market share, additional revenue channels and in some instances more favourable financing terms can also be achieved,” Moors said.

 

“Australia’s accommodation development pipeline is expanding with rooms under construction and likely proposed increasing by 10% since November 2007,” Moors said. “86% of proposed rooms are now hotels compared to 77% of rooms under construction being serviced apartments.”

 

Australian Property Journal