As borders open around Australia commercial real estate companies are looking toward a rebound and recovery of the hotel industry throughout 2021.

No explanation is required as to the cause of slow trading this year. Investor caution saw a 63 per cent drop in the 10-year average annual sales volume of $1.8 billion to $670 million over 17 transactions according to CBRE Hotels’ 2020 Hotels Sales in Review.

A turnaround however is nigh. Analysts say the most positive indicator so far is the $180 million transaction in late November involving Sydney investor Iris Capital acquiring 17 Ibis-branded hotels from AccorInvest. (AccorInvest is the share capital division of the multi-national accommodation and hospitality giant.) The 17 ibis hotels hold about 1800 rooms mainly in solid, central city locations and at airports in Sydney, Melbourne and Brisbane and Canberra, plus ibis Budget properties in regional airports and centres across the country. The JLL-brokered deal brought Iris Capital’s portfolio to 45 properties, in line with the company’s move into accommodation hotels which is adding to its long-term pub and tavern holdings around Australia.

Other major transactions this year that augur well for the industry include the $108 million purchase of Vibe Hotel Melbourne by Thai company Sino-Pacific Trading - the largest single-asset sale. Syrian billionaire Ghassan Aboud, owner of the Crystalbrook Collection properties, purchased The Fantauzzo in Brisbane for $67.2 million, and Amora Hotels and Resorts paid $67.9 million for The Novotel Brisbane with the intention of debuting the brand in Queensland debut in 2021.

CBRE Hotels managing director Michael Simpson said of all transactions the Iris Capital deal for Ibis-branded hotels was the greatest sign of stronger times ahead. “The new year is likely to see improved activity as capitalised investors take advantage of emerging opportunities materialising from the COVID-19 induced market dislocation,” he said. Helping drive this activity will be lenders acting on distressed assets once the trading moratorium ends this year. Mr Simpson said liquidity would improve for investors who will be motivated by low interest rates, but added that lenders were still expected to exercise caution in 2021.

Travel turns the tide

Confidence is also being boosted by this month’s border openings. Thousands of enthusiastic travellers are currently taking advantage of December 1 openings between Queensland, New South Wales and Victoria, followed by Western Australia on Tuesday December 8.

Hotel bookings had already start rising in the months prior. Colliers International Australian Hotel Markets Performance Dashboard shows October’s national hotel bookings hit 60.3 per cent of the 2019 level, a figure that surpassed the global average and an increase from 57.7 per cent in September. By mid-November bookings were hovering around the levels of mid-March, the time just prior the introduction of mandatory quarantining for returning overseas travellers. Of the capital cities Hobart has been one of the strongest, its November bookings spiking at 86 per cent of 2019 levels.

Opening up

Hotel openings are also on the increase after slowing this year as owners stared down the barrel of low demand. Colliers’ Australian Accommodation Supply Update reports 2540 rooms opening nationally in the last three months of this year, and 2464 rooms will open in Q1 next year. Melbourne will have the highest number - 2011 new rooms opening across the CBD and 712 in metro areas over the next six months.

This week Accor announced that it will open six new hotels across four Australian states and two in New Zealand next year. Among them will be the first Movenpick branded hotel in Australia, and a luxury boutique MGallery hotel, The Porter House Hotel Sydney offering branded residences. Located on Castlereagh Street The Porter Hotel will comprise a 36-storey tower with a 121-room hotel housed over levels 1-9 with 131 residential apartments above to level 34.

Next year would see the "peak of the supply cycle" said Colliers International Head of Hotels Gus Moors, with considerably fewer rooms under construction for 2022 and 2023 openings. “New openings are expected to moderate through the mid-part of 2021 before spiking up again at the end of the year, particularly in Sydney and Melbourne," Mr Moors said.

“Whilst some city hotel markets will be challenged by new supply opening over the next few years it will provide the culmination of the rejuvenation of the sector after decades of under-investment.”

Luxury living

2021 will also see a rise in the popularity of sophisticated ‘branded residences’ –developments of luxurious private apartments that come with full management delivering luxurious hotel-style conveniences and services. Buyers are resonating with these hotel-style benefits, leading to such major developments such as The Mondrian Hotel and Private Residences set to open in 2023 in Burleigh Heads on the Gold Coast. The project which marks the debut of sbe lifestyle brand Mondrian in Australia, comprises a dual-tower of 89 residential apartments alongside 208 hotel guest rooms opposite the beach. Guests and residents will have use of restaurants, a fitness centre and swimming pool.

The exclusive nature of branded residences is also part of the attraction, offering both privacy and prestige brand affiliation. “Private residences hold huge appeal as they limit unnecessary contact with other residents,” said Accor Pacific CEO, Simon McGrath. “We expect to see a boom in this area, particularly in the current climate.