Change is in the air for Australia’s major hotel owners

Mar 26, 09 | 1:55 am

According to the results of Jones Lang LaSalle Hotels' annual Top Owner Survey, Australia's top ten hotel owners saw little change in their portfolio holdings in 2008, accounting for a combined 12.9% of Australia's total room supply, compared to 12.4% in 2007.

Despite hotel sales totalling only AU$764million in 2008, some key assets change hands including Royal Pines Resort Gold Coast, Westin Melbourne, Holiday Inn Townsville, Novotel Rockford Darling Harbour, Crowne Plaza Newcastle, Gold Coast International Hotel and the Courtyard Marriott Surfers Paradise. Together these transactions represented 59% of the total volume.

"We saw a number of private companies and developers, along with one superannuation fund exit the sector in 2008," said Mr David Gibson, CEO Asia Pacific, Jones Lang LaSalle Hotels. He added "the prevailing economic sentiment meant that many traditional investors, including those in the top ten, did not compete for assets in 2008, allowing a number of new players to establish themselves in the Australian hotel investment market."

Consequently the top ten owners list remained relatively unchanged with the exception of Amalgamated Holdings Limited, whose acquisition of the Gold Coast International Hotel saw them jump from eleventh to ninth on the list.

"In terms of total room count the top ten owners are quite close. Of these, three are actively divesting assets at present and with several new investors currently in the market, the top ten list could look quite different at the end of 2009," said Mr Gibson.

The competitive landscape has now softened and many domestic investors are paring back their investment strategies, while others are getting ready to pick up great deals.  The combination of a reduced domestic capital base, lower interest rates, more favourable exchange rates and an increasing number of acquisition opportunities is creating a very attractive and unique environment for astute investors, particularly liquid overseas investors.  These factors, combined with the ensuing positive yield spread for hotels, are likely to tempt more investors back into market and instil some semblance of confidence. 

The GPT owned Four Points Darling Harbour and Voyages Hotels & Resorts Portfolio is currently on the market, while last week, Eureka Funds Management listed their Holiday Inn Hotels in Perth and Melbourne for sale.

TAHL continues to dominate the ownership of Australia's tourism accommodation market, owning 6,556 rooms across 43 hotels. Their position was strengthened in 2008 as a result of the opening of the Pullman and Formule 1 Hotels at Sydney Olympic Park and the Ibis King Street Wharf. However, development activity has slowed rapidly. 

Restricted debt markets and decreases in leisure and corporate travel, following the global financial crisis and slower economic growth, have already delayed many projects.  Lenders are also more likely to direct their restricted capital toward existing product rather than riskier new-build developments.

Domestic investors continue to own the majority of hotels in Australia, however Thakral Holdings Limited and Stamford Land Corporation, the largest internationally based owners of Australian hotels, may soon be joined on the top ten list by other offshore investors.  Recent hotel purchases were made by Thailand-based TCC Land (Novotel Rockford Darling Harbour, Hyatt Hotel Canberra and Hyatt Regency Adelaide) and Malaysia-based TA Enterprises Berhad (Westin Melbourne). 

"Over the last 10 years, Asian investors in particular have proved to be very countercyclical purchasers and market conditions are primed for this trend to continue at least in the short term." Mr Gibson added.  There are around 4,000 accommodation rooms for sale or 2% of the total accommodation supply and a considerably higher proportion of investment grade stock.  However the relatively benign supply outlook in most markets appears to be offsetting any concerns of a decline in trading with several new and existing investors actively looking in the market place.

Jones Lang LaSalle Hotels Top Owner Survey is the largest survey of its kind, analysing approximately 180 major hotels (100% ownership) and over 36,000 rooms.



About Jones Lang LaSalle Hotels

Jones Lang LaSalle Hotels, the first and leading global hotel investment services firm, is uniquely positioned to provide both the depth and breadth of advice required by hotel investors and hotel companies, through a robust and integrated local network. In 2007, Jones Lang LaSalle Hotels provided sale and purchase advice on 259 hotel transactions globally; representing a combined value of US$13.9 billion, a total of 54,763 hotel rooms in 84 cities. In addition advisory and valuation services were provided on 660 assignments globally for 182,048 rooms across more than 300 cities.

The global team comprises over 270 hotel specialists, operating from 31 offices in 18 countries. The firm's advice is supported by a dedicated global research team, which produced over 45 publications in 2007 in addition to client research. Jones Lang LaSalle Hotels' services span the hospitality spectrum; from luxury single assets and large portfolios to select service and budget hotels, resorts and pubs. Their services include investment sales, mergers and acquisitions, capital raising, valuation and appraisal, asset management, strategic planning, operator selection, management contract negotiation, consulting, industry research and project development services. Jones Lang LaSalle Hotels' clients have access to the resources of its parent company, Jones Lang LaSalle (NYSE: JLL). www.joneslanglasallehotels.com.