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Burt: escalation in new brands expected

Stephen Burt Colliers

By Stephen Burt, Managing Director – Hotels, Colliers International

Australia’s hotel stock is set to experience its first major overhaul in more than two decades.

During 2015, we expect to see an escalation in the number of new hotel brands as a result of all major operators introducing new brands, and also domestic players launching new concepts.

This is being driven by the need for hotel brands to revitalise their offerings particularly with regard to design, technology and entertainment. We expect more high-end accommodation which possesses its own distinctive regional flavour instead of conforming to a generic, international style.

For example, IHG, Hilton, Marriott, Hyatt, Starwood, Wyndham and Carlson have all introduced new brands. Local players such as Doma, and Rydges are rolling out new budget and budget luxury brands. These new brands will continue to proliferate, mostly in the mid-to-upscale lifestyle segment.

In addition to a number of boutique urban-oriented brands by smaller or newer players such as Hampshire (Chatwal, Dream and Night), B hotel and Thompson Hotels, the established brands are also embracing the concept. Marriott recently unveiled Moxy; IHG launched Even; Best Western introduced Vib; Red Lion’s RL was debuted in late 2014 and Hilton began rolling out its new Canopy brand.

Previously, major international hotel operators have developed their brands around key offerings and, consequently hotels in Melbourne have been identical to their hotels in Chicago or Mumbai. While all the back-end systems will be the same, it is anticipated that hotels will be more sympathetic to the local environment, showcasing local artwork, products, attractions and geographic features specific to the hotel’s location.

Significant investor visa driving demand
A lack of stock being offered to the market combined with increasing appetite from offshore purchasers is resulting in a seller’s market for premium hotel assets, while secondary assets will be underpinned by development opportunities and Significant Investor Visa (SIV) purchases.

This provides a visa for purchasers investing in excess of AUD$5 million in a compliant Australian business for four years to be eligible for permanent residency.

Hotel assets are particularly attractive to Asian investors because they are one of few qualifying investments that include property and a business as an ongoing concern.

We are already experiencing a rise in demand from investors under this scheme and expect it will be a major driver of hotel investment in 2015.
The purchaser profile of Australian hotel investors will continue to be dominated by buyers from Asia. Similar to trends in other property sectors, Chinese investors will be a feature of the market in 2015.

Chinese investors will look to diversify their portfolios and view Australia as a safe haven and a long-term investment destination.

This will incorporate two different categories of investor – those looking to acquire trophy assets at the top end of the market; and buyers at the mid and lower end of the market looking to take advantage of the SIV.

Investors under this scheme are targeting hotels in Sydney, Melbourne and the Gold Coast in city fringe and metropolitan areas, focusing on residential conversion opportunities.

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