Asia Buyers Snap Up Australian Hotels as Mining Boom Fills Rooms
Sales of Australian hotels to offshore buyers set a record in the first half as Asian companies including Shangri-La Asia Ltd. (69), Starhill Real Estate Investment Trust (STRH) and Langham Hospitality Group were lured by rising occupancy and room rates.
Companies outside of Australia accounted for A$990 million ($1 billion) of the purchases, or 90 percent, through June 30. That’s the highest first- half volume and percentage of the total 2002. Hong Kong and Malaysian companies were the most active buyers.
The biggest resources boom in a century is boosting mining- related business travel to the biggest cities, where companies such as BHP Billiton Ltd. (BHP) are based, while the Chinese are leading a pickup in tourism. Investors are preferring to buy rather than build as construction costs rise.
Sellers include companies seeking to divest noncore assets, such as Mirvac Group (MGR), which in December agreed to offload its hotel business, and real estate funds exiting properties as their investment terms end, including Colonial First State Global Asset Management.
Shangri-La on June 22 said it bought the five-star Shangri- La Hotel in Sydney for A$330 million, following the same week with the acquisition of the Holiday Inn in Brisbane for A$48 million. The 191-room central Brisbane hotel, which Shangri-La will begin operating this month, allows it to introduce the four-star Traders Hotel brand in Australia, it said on June 27. Shangri-La, which already holds a majority stake in the Marina Hotel in Cairns in northern Queensland, will expand in Australia which is the company’s third-largest market following China and the U.S, as the economy is strong, and there is an upward trend in domestic and international travel.
YTL Corp.-managed Starhill agreed to buy the Sydney, Brisbane and Melbourne Marriott hotels from Colonial First State Global Asset Management on June 13 for A$415 million.
Hong Kong-based Langham agreed to buy the 75-room, 21-suite Observatory Hotel in central Sydney from New York-listed Orient- Express Hotels Ltd. in June. Langham acquired the property –the top hotel in Australia in Conde Nast Traveler’s 2012 Gold List – - at about half its replacement value even with competition from other global groups, said Brett Butcher, chief executive officer of Langham.
Overseas Visitors
The number of overseas visitors to Australia rose a seasonally-adjusted 8.1 percent in June to 515,100 from a year ago, statistics bureau data show. Visitors from China and Japan were among groups leading the increase in the six months to June 30, according to Tourism Australia.
Rising Occupancies
Sydney had the highest hotel occupancy rate among major Australian cities this year through June 30, at 84.5 percent, according to Jones Lang LaSalle. Melbourne and Perth had occupancy rates of 80.4 percent, with Brisbane at 78.5 percent.
Building Costs
Input costs, which have risen for 82 months, climbed 4.9 points to 73.7 in June from May, the Housing Industry Association-AI Group’s Performance of Construction Index shows. Construction wages climbed 4.2 percent in the March quarter from a year earlier, according to statistics bureau figures.
“Boots and all”
Investors are increasingly entering Australia “boots and all, by securing both property assets and management rights,” Michael Thomson, national director for hotels and leisure at broker Colliers International, said in a release on July 19. “We are expecting to see hotel sales volumes for 2012 achieve levels not seen in Australia in several years.”
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