Australia's hotel sector is showing increasing signs of improving returns as demand for rooms increases.
Thakral Holdings, which owns hotels and resorts around Australia, said it had just experienced the strongest returns from its hotel division since the Sydney Olympics.
Colonial First State Trust announced last week that it planned to buy more hotels to capitalise on the improved trading conditions.
CFST's portfolio of five-star hotels experienced a 13 per cent rise in revenue per available room last year and it is particularly bullish about the outlook for the Brisbane market.
The managing director of Thakral, John Hudson, said that, with demand growing and hotel supply expanding only modestly, the industry was experiencing very strong trading conditions.
Even the Melbourne market, which has suffered from an oversupply of rooms, experienced a 4 per cent rise in room revenue in the past six months, he said.
"The demand side of the equation has been doing very well, especially domestically. Local travellers make up about 75 per cent of room nights," Mr Hudson said.
"What's killed the hotel sector in recent years has been supply. But now in Melbourne as the Crown Promenade hotel is finished and there isn't much else coming on stream, finally it has got rid of its supply problems," he said.
"Sydney had 3000 hotel rooms taken out of its supply after the Sydney Olympics, with just the new Hilton to come on stream."
Thakral recently reported a 19 per cent rise in net profit to $35 million and announced it had bought the Sheraton Hotel in Brisbane for $100 million.
It has new projects in the pipeline, including the $110 million Trilogy on the Esplanade in Cairns and Amphora, a resort in Queensland's Palm Cove with 108 luxury apartments.
Meanwhile, the reporting season for the listed property trust (LPT) sector in 2003-04 has gone down as the best in history, thanks to the booming retail and industrial markets.
Even the office sector, which has been in the doldrums for the past two years, has shown glimmers of life, while a push into the US through joint ventures has paid off for some trusts.
The average distribution returns from listed property trusts have been about 7 per cent, with unit price returns closer to 9 per cent and higher for the larger, diversified trusts.
The UBS property team says the better results have been due to high retail sales growth and comparative retail income growth, the strengthening industrial environment and a moderate office upturn.
"This points to greater retail LPT upside and support for industrial prices," UBS said.
"Their profit results are among the strongest on record, with average distribution growth of 5.6 per cent, compared with last year's 4.6 per cent."
Deutsche Bank's property analysts say that earnings-per-share growth was driven by the diversified, international and industrial trusts.