Another example is the recently completed sale of the Great Eastern Motor Lodge in Perth, which sold for A$40 m to Singapore based Hiap Hoe Limited. The successful transaction reflected an extremely competitive EOI process, given the opportunity to acquire a significant freehold landholding (11,892 sqm) as well as also being offered with vacant possession.

^{Great Eastern Motor Lodge}

^{Left to right – Sheraton Grand Mirage Gold Coast and Mercure Sunshine Coast Kawana Waters}

One conversion example is the recently settled transaction of the Bayview Eden in Melbourne which was bought by HOME for a complete redevelopment to build-to-rent (BTR). This hotel conversion thematic has been progressing for some time now and has especially been a stand-out within the Melbourne market over the past 24 months. Transactions of typically underperforming assets on large and well-located landholdings have attracted the strongest depth of capital from both hotel groups in search of value-add opportunities (refurbishment or rebranding) and developers looking for assets for conversion or redevelopment to alternative use.

The JLL team has been extremely active in this space and has had the pleasure of transacting the majority of these, in which the hotel was no longer the highest and best use, including Hotel Lindrum to Time & Place for redevelopment to strata office, Bayview on the Park to Altis Property Partners for complete redevelopment to BTR and essential worker housing, and Fraser Place Melbourne to Paloma Property Partners for conversion to co-living.

We have also seen hotel investors and developers take an interest in the challenged office sector, targeting specific office assets for potential conversion to hotel, with a number of examples of this already in Sydney, Adelaide and Canberra. One of the most notable being JLL’s sale of office building 39 York Street, Sydney. The property sold for A$52.6 m to Singaporean group Invictus Developments, who plan on converting the prized-located asset into a hotel, with the potential to open by 2025.

Other notable sales this year have since seen a wave of refurbishments and rebranding’s, such as the Woolstore 1888 by Ovolo which has joined Accor’s Handwritten Collection, The Pacific Brisbane rebranded as a Mercure, and Sebel Ringwood which has become a Rydges.

As hotel investment levels continue to recover, another significant emerging fundamental is ESG, which continues to become increasingly important for investors and broader stakeholders. New metrics announced for the 12th Uniform System of Account for the Lodging Industry (USALI) will require hotels to take into account their Energy, Water and Waste (EWW) expenses, which will provide further transparency. Public policy and regulation across Asia Pacific and more locally continue to evolve to provide further guidance to ESG to investors.

Like what we’ve seen for some time in the UK and throughout Europe in particular, it’s increasingly obvious to investors that not transitioning to ESG principles will result in brown discounts and a stranded asset in a complex future. Conversely, hotels that clearly articulate a commitment to sustainability, wellness, and authenticity will have a competitive advantage in terms of increasing market share and driving higher asset values. That said, investors must look towards sustainability as a core component of hotel underwriting and investment decisions, with ESG now being an industry focus.