More than 200 people joined to watch RWC’s March Between the Lines Live webinar, where a panel of experts discussed the tourism market.
Ray White head of research Vanessa Rader hosted the webinar and was joined by Ray White Valuations Hotel and Leisure Director Adam Ellis, and HTL Property National Director for Accommodation Andrew Jackson to discuss the outlook for the hotel asset class.
Despite being one of the most impacted asset classes during the pandemic, Mr Jackson said the outlook was positive for the nation’s hotel and leisure market.
“Deal flow was more subdued last year than it had been the year prior, but there were still some big ticket deals,” he said.
“There were more domestic buyers and less prevalent activity from offshore buyers which was an interesting trend. Private investors and family offices featured prominently..
“Enquiry has been very encouraging so far this year and we’ve had a noticeable increase in offshore interest.
“However, we still think domestic private buyers will be dominant this year, particularly established portfolio owners who have operational data and expertise to draw from when assessing deals and existing banking relationships, giving them an advantage in terms of transaction timing and certainty offered.”
Mr Ellis said the sector had bounced back very well when compared to pre-covid levels.
“RevPar, or revenue per available room is up 29 per cent compared to pre covid, and average daily room rate is up 8 or 9 per cent compared to 2019,” he said.
“Next year we will see occupancy rebuilding. In 2024 I think ADR growth will be slower, and RevPar will be built on occupancy.
“ADR is slowing, we had a lot of growth in the last few years so it had to slow down eventually, and occupancy will catch up.”
Mr Ellis said cap rates were also increasing.
“Cap rates are on the rise in 2024, but that doesn't mean values are going backwards because incomes are higher,” he said.
“Cap rates are on the rise but that's not bringing values down.”
Mr Jackson said he didn't expect to see downward pricing adjustments in the hotel sector.
“We don't expect to see discounting of assets in 2024. The sector as a whole continues to trade strongly and while there has been evidence of yield softening in other sectors, it is difficult to see that in the accommodation hotel sector," he said.
“Pricing has remained firm in the hotel and leisure sector generally, largely because of the high barriers to entry.
“Hotel yields are not as sharp as other sectors and therefore offer a far more attractive risk reward return profile.
“One of the attractions of hotels as an investment class is that room prices can be adjusted in real time to pass on operational cost increases, offering investors a hedge against inflationary pressures that other investments cannot do in the same real time.
“This has resulted in increased investor interest and allocation to this sector."
“That's the beauty of hotel and leisure assets, there’s a lot of operational levers you can pull to maximise the return.”
Ms Rader asked the experts where they would invest their hard earned money.
Mr Jackson said: “I would invest in a simple 200 room operation in the middle of Sydney city, or a holiday park on the coast with a nice point break directly out front where I can hand my suit in at the door.”
Mr Ellis said: “I would invest in a well located room-only hotel in Sydney or Brisbane, or I think office conversions in the fringe areas have a lot of legs as well.”
The next Between the Lines Live webinar will be held on April 10, where Ms Rader will speak to RWC North Sydney agent Scott Stephens and RWC Eastern Suburbs agent Zorick Toltsan about the high-street retail market.
