After a tough few years during COVID, tourism assets are once again seeing increased demand, according to an expert.

Ray White Commercial, Head of Research Vanessa Rader says, with both domestic and international travel showing improvements, investment levels in hotel assets across the country has increased.

She said during 2022/23 volumes reached $4.1billion, a growth of 56.7 per cent on the prior year, highlighting the improved confidence across the tourism industry. “Most investment has been in the Sydney market, which continues to show improvement in occupancy and room rates, currently at 77.2 per cent and $245/night respectively,” Ms Rader said.

“Gold Coast has been another key investment market capitalising on strong occupancy due to both busy conference and holiday periods growing annual average daily room rate to over $270/night.

Ms Rader said the investment profile, however, has seen some significant change. “Historically, offshore buyers have been the major purchasers of hotel assets, however, we have seen a reduction this year in activity from this buyer group,” she said.
 

“Private and institutional buyers are representing the greatest net acquisition in 2023 with foreign investors representing the largest seller group.” She said hotels and tourism have bounced back strongly since borders reopened.

“Over the last year, returns achieved 5.8 per cent, trending ahead of other traditional commercial assets other than industrial, which has been the standout performer over the last few years,” she said.

“The five-year average returns of just 3 per cent highlights the difficulty for this sector during the pandemic era, while assets such as office recorded 6.6 per cent returns.

“However, over the longer 10-year period, we can see despite these difficulties that returns continued to achieve outstanding levels at 9.2 per cent per annum closely aligned to office at 9.4 per cent and well ahead of the retail sector which only represented a 5.7 per cent annual return.”

Looking ahead, Ms Rader said the outlook for the hotel sector is strong. “While inflationary pressures have been elevated, reducing discretionary spending levels, we continue to see demand for travel high domestically.

“The current state of the Australian dollar will further enhance the attractiveness of Australia as a destination, improving the demand for accommodation, growing occupancy and returns for this commercial investment class.”