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}

This was also an overarching theme in a majority of deals last year, including the notable landmark sale of the Sheraton Grand Mirage Gold Coast and Mercure Sunshine Coast Kawana Waters. The Sheraton, which achieved the largest ever single asset price on the Gold Coast (A$192 million), was driven a number of strong fundamentals including, being a unique irreplaceable trophy asset, vacant possession of management allowing for a wider buyer pool, positive spread vs cost of debt at stabilisation and a value-add proposition through refurbishment. This process attracted a global pool of investors comprising of a range of capital and strategies, which fuelled increased competition and drove pricing and terms of sale.

Similarly with the transaction of the Mercure (A$21.3 million), the competitive sales campaign which attracted 115 enquiries, 14 inspections and 10 offers, was driven by qualities such as vacant possession of management, strong trading performance but still with trading upside, unique demand drivers and quality of asset.

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

^{Top left to bottom right – Hotel Lindrum, Bayview Eden, Bayview on the Park, and Fraser Place Melbourne}

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.