Skip Ribbon Commands
Skip to main content

News release

Sydney

The changing landscape of offshore investor interest in Australian hotels

Recent transactions bring a major change in ownership composition


​Sydney, 13 November 2013 - Following two years of record breaking hotel transactions including most recently the Four Seasons Hotel Sydney and TAHL portfolio, Australian hotels have well and truly become the domain of international investors.

The Australian hotel investment market has long been a focus of South East Asian investors, however their level of interest increased substantiality in the years shortly after the global economic crisis. At the time, hotel trading was down, debt finance scarce, exchange rates remained at historical averages and most listed groups weren't able to pursue acquisitions.

This allowed a number of well-capitalised South East Asian based high net worth individuals, private companies and some opportunistic funds to take advantage of a 'buyer's market' and benefit from the expected speedy recovery as a result of the strong fundamentals of the Australian economy, hotel investment market, and how the two relate to each other.

Following increasing levels of annual transaction activity, last year the Australian hotel investment market experienced one of the strongest years on record with 25 major transactions occurring for a total transaction volume of $1.44 billion.

Mr Peter Harper, Senior Vice President, Investment Sales, Jones Lang LaSalle's Hotels & Hospitality Group, stated "Continuing the trend experienced over the three years prior, Asian investors dominated Australian hotel investment accounting for 72% of transaction volume in 2012. Whilst Singaporeans were typically the primary source of investment from 2009 through 2011, Hong Kong investors became the most active being responsible for 30% of total transaction volume, followed closely by Malaysian investors at 29%. This change in source of origin largely represented the investor shift from high net worth individuals and opportunity funds to owner-operators."

"2012 also saw Chinese investors enter the market. This is a geographic investor source which has previously had very little involvement in Australian hotels; however in 2012 they acquired two assets, Lindeman Island Resort and Palazzo Versace Resort." Mr Harper added.

"During this time there were also a large number of other investors from China, as well as several from Korea, India, the Middle East and USA, looking at hotel assets and participating in sale processes.  Most had existing hotel investments in their home markets but were seeking geographic diversification. These groups have now come to the fore in 2013, accounting for two landmark transactions being the sale of the Four Seasons Hotel Sydney to Korean based Mirae Asset Global Investments and the Abu Dhabi Investments Authorities' (ADIA) corporate acquisition of the 31 asset Tourism Asset Holdings Limited portfolio. Chinese groups were also responsible for several other smaller transactions." commented Mr Harper.

Year-to-date transactions in Australia have since topped AU$1.6 billion, with the year-end total expected to reach AU$1.9 billion, the highest level in history.

The emergence of investors from these three regions has come about from easing governance in their own countries over offshore investment, an increasing weight of capital seeking low risk geographic diversification, and the availability of institutional grade investment opportunities.

Mr Harper said "Australia certainly holds a competitive advantage over other major global investment destinations for Asian investors given its close proximity, similar time zone and increasing levels of shared inbound/outbound tourism. However, what is attracting these new entrants to the market most is Australia's solid economic fundamentals, benign new hotel supply pipeline, strong trading growth outlook, and its continued global reputation of being one of the most stable and desirable hotel investment markets in the world."

"Whilst once somewhat isolated, in the space of just over a year the landscape of offshore investor interest in Australian hotels now spans almost all of Asia and into the Middle East. Furthermore, we expect this trend to continue with more investor interest flowing from these countries, following these principal acquisitions." concluded Mr Harper.