Sydney, Melbourne brace for new hotel openings
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Sydney, Melbourne brace for new hotel openings

Worldwide tourism is about 5 per cent of the global economy, while hotel supply is about 1 per cent, which has given heart to owners and operators that the sector has good growth potential.

Simon McGrath, chief operating officer at AccorHotels Pacific, says the statistics speak for themselves, at a time when the Australian market, particularly the eastern seaboard, has a plethora of new properties under construction and also due to open in 2019.

''Whilst there is some supply coming on in the new year, remember in Sydney, alone there was nothing from 2000 to about 2014, so we are playing catch up,'' Mr McGrath said.

Sofitel Darling Harbour, one of the first to open in 18 years.

Sofitel Darling Harbour, one of the first to open in 18 years.Credit:James Brickwood

''The arrival of the International Convention Centre in Sydney, more sporting events in Melbourne and the new airlines routes to regional Australia, has seen an explosion in demand for hotels.

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''This investment in new hard infrastructure, which includes the major upgrades to airports across the country, drives the is demand and as domestic and international tourism grows, any new supply issues will dissipate.''

AccorHotels has also expanded its presence in regional Australia, Indonesia and Hawaii with the $1.2 billion takeover of the Mantra hotel group.

The only new hotel to open in 2018 was the Four Points by Sheraton Sydney, Central Park. It is owned by Dr Jerry Schwartz and is the latest addition to the multi-stage $2 billion Central Park
development, a joint venture between Frasers Property Australia and Sekisui House Australia.

There are also the new operators Alex Thorpe and Rhys Williams, who run the Veriu brand and the Collectionist group, run by Daniel Symonds & Toby Raphael.

Crown Group, run by Iwan Sunito, has also opened its SKYE Suites Sydney in Kent Street, aimed at  domestic and international visitors, and business travellers. Crown also has Skye Suites at Parramatta and plans to roll out more across the country.

Some of the larger entrants in the coming 18 months include the W Hotel, Ritz-Carlton and Crown Resorts in Sydney.

In Melbourne there is the new AccorHotels’ first vertical dual-branded hotel integration, Novotel and ibis Melbourne Central and the MGallery by Sofitel at Chadstone.

Salta Properties' proposed new 26 storey apartment tower with an Indigo Hotel in Melbourne's Docklands.

Salta Properties' proposed new 26 storey apartment tower with an Indigo Hotel in Melbourne's Docklands.

Intercontental Hotel Group (IHG) has a proposed $200 million redevelopment of The Walk Arcade, a shopping mall that runs from Bourke Street Mall to Little Collins Street.

Due to open in 2022, IHG will operate a 453-room dual branded hotel comprising a 272-room midscale Holiday Inn fronting Bourke Street Mall alongside a boutique, upmarket 181-room Hotel Indigo backing onto Little Collins Street. It is also planning a third voco hotel with the Brady Group.

Leanne Harwood, IHG managing director, Australasia and Japan, says the hotel sector is in good hands.

''It is great to see the industry expand with different brands and offerings,'' Ms Harwood said.

''Travellers are more discerning now and like to have a variety of offerings which has prompted us to offer the voco, indigo and the wellness brand, Even. We see more demand for these hotel styles from the younger guests. while the traditional hotel brands are very popular with older guests.''

Ms Harwood said despite the new supply coming in Australia, the demand will absorb the increase.

''The hotel sector is cyclical and when we get a raft of new supply, there is a dip, but as we still expect strong tourism numbers - local and overseas - the rooms will fill up,'' Ms Harwood said.

Australian dollar

According to Wayne Bunz, CBRE's senior director of CBRE national hotel brokerage, the low Australian dollar will continue to bring good news for the domestic tourism industry, with Australians rediscovering their own backyard as they take advantage of more affordable holiday options.

''The Australian hotel landscape is better positioned than ever to soak up this demand, with a tranche of new supply nationwide providing more diverse accommodation options in our top tourism destinations as well as new benchmarks in the luxury end of the market,'' Mr Bunz said.

''The customer appetite for luxury product is here – people are willing to pay a premium as long as the service delivers. With more and more entrants in this top end of the market, Australia now has the product to meet this demand.''

Mr Bunz said locations with substantial oversupply in residential stock pose a threat to the hotel market given the potential for these to be tipped into the overnight letting pool or AIRBNB.

There has been some evidence of this in Melbourne recently and common on the Gold Coast over the years.

''While we expect occupancy in Melbourne will be sustainable, there may be pressure on rates because of this. This will lead to an increase in buying opportunities in Melbourne over the next two to three years,'' Mr Bunz said.

''Sydney remains a tier one destination from a tourism point of view, with limited investment stock available.

''When opportunities do become available, competitive buyer tension drives prices to new highs – as evidenced by the sale of Little Albion this year, which achieved a record price per key. The market’s strength will see owners hold onto stock, with no major transactions on the horizon in the Sydney CBD for the next two to three years.''

Business sentiment

Savills' research says consumer and business sentiment for CBD hotels was the strongest of all non-residential property sectors, according to the latest NAB Quarterly Australian Commercial Property Survey, on the back of further projected falls to the already low AUD, which is likely to drive international tourist numbers up considerably.

IHG will also give it’s Kirkton Park property in the NSW wine region a refresh and rebrand it as voco Kirkton Park Hunter Valley, making it the fourth signing in Australia since IHG launched the upscale voco brand globally in June.

With 70  rooms, the property was one of the first Hunter Valley Hotels established in the wine region. In June 2017 IHG took over management of the hotel under the banner of Kirkton Park Hunter Valley and has since built a reputation for being one of the wine region’s most desirable destinations.

Launched in June this year, the voco brand will strengthen IHG’s offer in the $40 billion upscale segment, which is expected to grow by a further $20 billion by 2025. This distinctive brand will offer owners the ability to drive higher returns by delivering a compelling guest experience and leveraging IHG’s powerful systems. Including best-in-class revenue management and technology capabilities and IHG Rewards Club, one of the world’s largest hotel loyalty program.

Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.

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