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Hotel Industry News |
Tuesday December 2nd, 2008 |
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Australian Hotel Investment Sentiment Falls But Buyer Expectations Remain High |
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Data released this week by real estate investment bank Sonnenblick-Goldman, confirms sharply lower hotel investor and lender sentiment, but surprisingly strong continued interest in acquiring and holding hotels in key Australian markets, ahead of an expected resurgence in industry performance in 2004. |
Findings from Sonnenblick-Goldman’s 2003 Hotel Investor and Lender Survey, confirm that investor and lender support for the industry collapsed in the first quarter of 2003 in response to SARS and Iraq War impacts. Only 34% of investors judged the hotel investment outlook to be positive, which compares to 50% in 2002 and 66% when the Survey was first conducted in 2000.
Of the investors surveyed, only 7% ranked hotels as being more attractive than other types of real estate, compared to 37% in the 2002 Survey. 100% of lenders surveyed, ranked other real estate more attractive (compared to 83% in 2002).
Despite the negative market sentiment, a surprisingly high 42% of investors indicated a desire to acquire hotels in 2003, which contrasts with only 13% declaring 2003 a year to sell down hotels. Sonnenblick- Goldman Managing Director Mr John Smith, believes that this result confirms both transaction and anecdotal evidence of continued investor support for quality assets in key Australian and New Zealand markets.
Speaking last week at the 2003 Australia and New Zealand Hotel Investment Conference (that Sonnenblick-Goldman co-hosts each year), Mr Smith pointed out that despite numerous global and local deterrents to hotel investment, 2002/2003 had witnessed a strong surge in hotel transactions in Australia, including landmark deals such as the sale of the Park Hyatt Sydney, the ANA Sydney, the Westin Sydney and Le Meridien Sydney, as well as the Brisbane Hilton and the Pier Cairns.
“The volume of deals has been impressive, but even more significant has been the achieved sale prices, that have either matched or exceeded market expectations. It highlights the resilience of the sector and underlying confidence in the future of the industry, despite current challenges” he said.
Investor respondents to the Sonnenblick-Goldman Survey, for the second year in a row, ranked low cost hotel options, such as budget and backpacker hotels as the preferred types of hotels for acquisition. Sydney was yet again voted the most desirable market, as well as being adjudged the best value for money market, despite record prices having been paid for Sydney hotels in the past year.
“Hotel investors in Sydney, and in particular recent purchasers, are betting on a steep increase in revenues and profits for the four and five star sectors, once the $300m of current hotel refurbishments are completed and current market constraints are overcome – it’s a brave call given past disappointments” Mr Smith commented.
Perth was ranked the least desirable market and together with Melbourne, was ranked the worst value for money market. “Melbourne is heading for a bleak 2004 due to new room supply problems. We are also concerned about the risk of fall out in Melbourne from unsuccessful serviced apartment developments” Mr Smith added.
Lenders to the industry declared their intention to resist funding of new hotel rooms in the year ahead, with 73% declaring a worse outlook for debt for new hotel construction (compared to 45% for the funding of existing hotels).
Westpac was again adjudged the leading banker to the industry, followed by ANZ.
For further information call John Smith, Managing Director, Sonnenblick-Goldman (Australia) Pty Ltd on (612) 9372 0808, or contact him on jsmith@sonngold.com.
Sonnenblick-Goldman Company is a leading independent real estate investment banking firm. Founded in 1893 to serve the financing needs of the real estate industry, Sonnenblick-Goldman Company provides a full range of real estate financial services including debt and equity placements, joint ventures, investment sales and real estate advisory services. Headquartered in New York, Sonnenblick-Goldman maintains offices in Sydney, Hong Kong, San Francisco, and Tokyo. For more information, visit Sonnenblick-Goldman Company’s website at www.sonngold.com.
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