Savills Hotels. market report Q3/2015. savills.com.au

Transcription

1 Savills Hotels market report Q3/2015 savills.com.au

2 1 Contents 02 Introduction 04 Tourism & KPI trends 08 Hotel transactions 12 Cruise ships docking at a hotel near you 16 Savills hotels agency and advisory track record 20 Savills key contacts

3 2 Introduction Michael Simpson Managing Director Hotels, Australia & New Zealand Another year of major deal activity totalling $3.7 billion for the 12 months ended September 2015, confirms Australian hotels are keenly sought after by both domestic and international investors. The investment activity and compressing yields are further supported by strong market trading fundamentals in Australia s key cities, despite a softening in resource dependent markets such as Perth and Brisbane. There remains an eagerness to invest in Australia generally and Australian real estate despite numerous headwinds as noted below: Geopolitical events China Stock market route and softening economic growth The financial impact of America potentially increasing interest rates for the first time since 2006 Sluggish Eurozone economic activity which seemingly remains dependent on Quantitative Easing Australia s geographic isolation has previously been regarded as a negative. However, in the face of uncertain and tumultuous times, Australia s long haul island destination status has become a positive attribute contributing to our perception as a safe haven investment market. The combination of a low Australian dollar and relatively safe haven status is resulting in increased inbound tourism, a reduction in Australian outbound travel and therefore increased domestic tourism activity, which is stimulating Australian hotel trading performance. The decision to invest in Australia is therefore well supported by very real and positive fundamentals. In summary, Australia is a wonderful place to live, holiday, do business and invest. The Savills Hotels team wishes all of our supporters a happy festive season and New Year. We look forward to your continued support in 2016.

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5 4 Tourism & KPI trends As we approach the end of 2015, Australia s key accommodation markets are depicting a dichotomy of high and poor performing markets. Vasso Zographou Director Hotels, NSW RevPAR for the Australia wide market continues to hover around $137, showing growth of 3.4 percent compared to the previous year. However, there is mixed performance when individual cities are considered. Performing Markets Primary reasons for improved performance: Sydney & Melbourne Construction activity Economic activity Increased leisure from domestic and international markets stimulated by a lower Australian dollar Hobart/Gold Coast/Cairns Increased leisure demand from domestic and international markets stimulated by a lower Australian dollar Canberra Following the Liberal government s cost cutting exercise of government departments, the subsequent and expected resumption of government and associated business activity has occurred to restimulate the market Table 1 Overall Hotel Performance KPI s YTD October 2015 Location Occupancy ADR YTD Growth RevPAR RevPAR growth vs 2014* Australia 75.5% $ % $ % Sydney 85.3% $ % $ % Perth 82.0% $ % $ % Melbourne 82.4% $ % $ % Brisbane 74.0% $ % $ % Hobart 79.9% $ % $ % Darwin 69.8% $ % $ % Canberra 74.5% $ % $ % Gold Coast 71.8% $ % $ % Adelaide 76.5% $ % $ % Cairns 79.0% $ % $ % Source: STR Global * YTD growth for October 2015 versus YTD Under Performing Markets Primary reasons for a decline in performance: Perth/Brisbane The curtailment to resource investment activity following the end of Australia s resource boom New hotel supply in a softening market Darwin Slowdown in referral business and leisure activity fuelled by the conclusion of the resources boom Reduced government and business activity following the implementation of the government's policy to process asylum seekers offshore Conversely, the stationing of American naval vessels in Darwin, as part of the United States military strategic plan in the South Pacific region, will see an estimated 5,000 service personnel based in Darwin which will help stimulate the local market International Arrivals & Spending at Record Levels for 12 months to June 2015 Australia received 7.1 million international visitors (up 7 percent) and 251 million international visitor nights (up 8.2 percent) for the year ended 30 June Leisure arrivals (Holiday + VFR) continued to drive international arrivals growth, with an increase of 4.2 percent over the 12 month period.

6 5 Tourism & KPI trends (cont.) On the basis that China continues its visitation growth rate trend (up 13.1 percent in 2015), China will exceed one million visitors in the next year and will continue its dominance as the highest contributor of room nights and visitor expenditure in Australia. International visitors spend totalled AU$33.4 billion (up 10 percent) for the year ended 30 June China is the highest spending visitor market (circa AU$7,500 per visitor), followed by Hong Kong, Germany, UK and USA which fall within a range of circa AU$5,200 AU$5,300 per visitor. New Zealanders, who represent the most visitors to Australia, are the lowest spenders (circa AU$1,970 per visitor). Top 10 International Visitor Markets 2015/2016 Total visitors 000 Share of total visitors Visitors annual growth YOY Share of total visitor nights Visitor nights annual growth New Zealand China UK USA Singapore 1, % % % % % 3.6% 21.9% 0.1% 9.1% 1.8% 6.9% 15.4% 10.9% 5.4% 2.4% 10.3% 18.5% 2.1% 14.7% 11.4% Malaysia Japan (60%) & Korea (40%) Hong Kong India Germany % % % % % 4.9% 0.3% 4.8% 7.9% 3% 3.3% 19.3% 3.1% 5.5% 3.4% 5.3% 9.8% 37.4% 7.5% 11.1% Source: Tourism Research Australia & Savills.

7 6 Graph 1 details projected visitor nights for both international and domestic visitor nights for the period 2016 through 2025, as forecasted by Tourism Research Australia. Total inbound visitors are forecast to grow at a Compound Annual Growth Average (CAAG) of 4.1 percent whilst total international visitor nights are forecast to grow at a CAAG of 4.9 percent for the next ten years. Similarly, domestic visitor nights are forecast to grow at a CAAG of 2.8 percent for the next ten years. Accordingly, the future for Australian tourism is on a growth trajectory, albeit the recent events in Paris highlight how extraneous events can change travel attitudes overnight. Nonetheless, Australia is seen as a relatively safe haven tourist destination which should support continued tourism activity. Graph 1 Australian Domestic and International Visitor Nights Forecast Visitor Nights (A) (A) International Visitor Nights Source: Tourism Research Australia & Savills. Domestic Visitor Nights International Change % Domestic Change % YOY 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

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9 8 Hotel transactions Hotel transaction volumes continue to trend upwards, and although 2016 is likely to experience high profile sales, we believe the pace of growth may not continue at the same rate. Adrian Archer Director Valuation & Advisory Hotels, Australia In the 12 months to September 2015, Savills recorded 69 hotel transactions over $5m, up 112 percent on the previous year, totalling $3.7bn of which nearly 50 percent were in NSW. Foreign investors are still the leading net buyer at nearly 60 percent of all transactions with domestic owners calling the market and being the net sellers. NT $141m 2 sales WA $221m 8 sales QLD $976m 18 sales SA $18m 1 sale NSW $1,800m 24 sales TAS $70m 2 sales VIC $336m 10 sales ACT $138m 4 sales

10 9 Hotel transactions (cont.) The passing yield continues Australian to fall, Hotels now at 6.9% for the nine months to September 2015 compared to 7.5% Average for $ per the Room same and Median period Yieldsin Jan 09 to Sept -15 Graph 2 Australian Hotels Average $ per Room and Median Yields Jan 2009 to Sept 2015 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 10% 9% 8% 7% 6% 5% 4% Avg. $/room Median Yield Source: Real Capital Analytics/Savills Research. Table 2 Sample of recent hotel transactions Hotel Date Price per Room Passing Yield Quest Macquarie Park Oct 2015 $303, % Penisone Hotel, Melbourne Sept 2015 $288, % Rendezvous Central Sydney Aug 2015 $327, % Four Points by Sheraton Perth Aug 2015 $329, % Crowne Plaza Gold Coast June 2015 $260, % Seagulls Resort, Townsville June 2015 $89, % Adina Fortitude Valley, Brisbane May 2015 $314, % Source: Savills Research. The capital placement requirements for investment into Australian hotels has put pressure on funds to acquire assets and seek higher yielding opportunities outside major key cities. As existing hotel assets are highly sought after, new hotel development opportunities are considered. For example, the Lend Lease Melbourne hotel, Goodman's Pullman Sydney Airport and the Grocon Ribbon (rumoured to be a W hotel) on Sydney s Darling Harbour are available as forward commitments. However, debt finance for hotel development is becoming harder with banks reducing LVRs resulting in increased equity requirements for developers. A forward sale is therefore particularly appealing in the current strong market.

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13 12 Cruise ships docking at a hotel near you As Sydney welcomed the five-ship P&O Ship program in November, Savills examines the impact of the cruise ship industry on the Sydney hotel market. Iris Liu Assistant Valuer Valuation & Advisory Hotels, NSW Melbourne s hotel market has long been bolstered by major sporting events such as the Australian Open, the Australian Formula One Grand Prix, AFL Grand Final, Melbourne Spring Racing Carnival and Boxing Day Test Match. But, as Sydney continues to grow as a major international cruise destination, Sydney s inner CBD hotels will clearly reap the benefits. Sydney remains the main port for embarkation and disembarkation in Australia and continues to grow as a major international cruise destination. Furthermore, Sydney is the only port in Australia which has two dedicated cruise facilities, the Overseas Passenger Terminal and White Bay, which can accommodate three cruise ships simultaneously. More recently the Overseas Passenger Terminal underwent a major upgrade and can now accommodate the megaliners, such as Cunard s QE2. It has also recently been reported that Ovation of the Seas, a US$1 billion (AU$1.39 billion) 5,000 passenger cruise ship, will be arriving into Sydney waters in As the majority of passengers on cruise ships either start or finish their cruise in Sydney the impact will be felt by the hotels nearest Circular Quay, including Park Hyatt Sydney, Four Seasons, Shangrila, Pullman Quay Grand, Sydney Harbour Marriott, Intercontinental, Holiday Inn Old Sydney and then rippling out towards Sydney s remaining southern CBD hotels. Cruise ship guests are taking the opportunity to explore Sydney and staying additional nights in Sydney s hotels. Moreover, international guests are capitalising on the falling Australian dollar and staying at Sydney 5-star hotels which have become more affordable.

14 13 Cruise ships (cont.) Sydney is a bucket list destination and will receive maiden voyages throughout 2015/2016 from cruise ships including: Costa Luminosa, Golden Princess, Pacific Aria, Pacific Eden, Explorer of the Seas, Superstar Virgo, Azamara Quest and Pacific Venus. In there was a reported 256 cruise ship visits, with passenger days exceeding one million, up from 240 visits and 0.97 million passenger days in (source: Destination NSW). Additionally, Destination NSW reported that in around 84% of international passengers stayed up to three nights in Sydney, which is a typical embarkation/disembarkation travel pattern displayed in other global port cities. According to the Port Authority of New South Wales, more than 346 cruise ships are expected to enter Sydney s ports between 25 November 2015 and 24 November 2016, with passenger days expected to surpass 1.35 million, contributing to demand for Sydney hotel rooms, adding further pressure on existing high occupancy levels which are currently sitting at 85% YTD October Graph 4 plots the monthly number of cruise ship arrivals/departures in Sydney harbour and the performance of the Sydney market for Luxury and Upper upscale hotels for the FY 2014/15 during which 293 cruise ships visited Sydney. Graph 3 Cruise Ship Schedule Dec 2015 to Nov Dec-15 Jan-16 Feb-16 Dec-16 Mar-16 Source: Port Authority of New South Wales & Savills. Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Cruise Ship Schedule Dec Nov 2017 Oct Summer 1. Summer 2. Autumn 3. Winter 4. Spring 1. Summer 2. Autumn 3. Winter 4. Spring $350 $300 $250 $200 $150 $100 $50 $0 Nov-16 Hotel Performance (Luxury and Upper Upscale) and Cruise Ships Graph 4 Hotel Performance (Luxury and Upper Upscale) and Cruise Ships Jul to Jun Jan-17 Feb-17 Dec-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Source: STR Global/Savills Hotels. ADR RevPAR Occupancy No. of Ships Sydney Luxury and Upper upscale occupancies have remained strong, in the range of 82% through 93%, throughout this period with ADR above $200 in all months, culminating in an annual RevPAR of $236.5 (up 4% YOY). Whilst there is no doubt cruise ship related hotel occupancy has an accretive impact, occupancy patterns continue to reflect the ebb and flow of the corporate market, market seasonality and holiday periods. As Sydney s occupancy rates creep above 85% and hotel Operators continue to yield room rates, the knock on effect will be increased RevPAR and higher profitability. The resultant improvement in Sydney s trading fundamentals will continue to entice investment in this sector. Oct-17 Total Nov-17 94% 92% 90% 88% 86% 84% 82% 80%

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17 16 Savills hotels agency and advisory track record Savills Hotels is a truly global platform; we work collaboratively on a daily basis with our teams around the globe to bring owners to the market and buyers to the right opportunity. Through our international team and more specifically our Sydney, Melbourne, Brisbane, Singapore, Hong Kong, Shenzhen, Guangzhou, Shanghai, Beijing, Tokyo, Seoul, London and New York offices, we have the ability to leverage off our global presence and immediately draw attention to an opportunity with both national and international buyers. Sofitel, Sydney Darling Harbour Client Lend Lease Rooms 600 approx. Price Above AU$340m Agent Michael Simpson Date Kent Street, Sydney Client Mayville Bay Pty Ltd Rooms N/A Role Market Demand & Feasibility Advisory Agent Michael Simpson Date 2015 Seagulls Resort, Townsville Client Tarnow Pty Ltd Rooms 69 Price AU$6.2m Agent Nic Simarro & Michael Simpson Date 2015

18 17 Hotels track record (cont.) W, Brisbane Client Shayher Leisure Holdings Pty Ltd Rooms 305 Role Operator Selection & Hotel Advisory Agent Michael Simpson Date 2014 Sofitel Wentworth, Sydney Valuation of 436 room 5 star hotel for transfer into a hospitality REIT. Date 2014 & 2015 NEXT Hotel, Brisbane Valuation of 304 room 4.5 star hotel and Forever 21 retail unit for acquisition purposes. Date 2014 Rendezvous Clocktower, Sydney Valuation of 4.5 star serviced apartment complex in The Rocks for acquisition and loan security purposes. Date 2015 Valued AU$6.5 billion and nearly 20,000 hotel rooms. Ascendas Hotel Portfolio, Australia Valuation of Portfolio of seven managed hotels with 2,024 rooms in Sydney, Melbourne, Brisbane & Cairns for Asset Reporting & first mortgage security purposes. Date 2014 & 2015 Marriott Hotel Portfolio, Australia Portfolio valuation of 5 star hotels with over 1,000 rooms across Sydney, Melbourne and Brisbane for asset reporting purposes. Date 2014 & 2015

19 18 Radisson Blu Oslo Airport Hotel Avinor Norwegian Client Ministry of Transport and Communications Rooms 500 Price 172m (approx. AU$252m) Agent Rob Stapleton Date 2015 Kingsway Hall Hotel, London Client Cola Holdings Rooms 170 Price Undisclosed guide 95m (approx. AU$198m) Agent Rob Stapleton Date 2015 Hilton Newcastle, Gateshead Client Aviva Investors Rooms 254 Price Undisclosed guide 36m (approx. AU$75m) Agent Rob Stapleton Date 2015 Quest Serviced Apartments Portfolio, Australia Valuation of a portfolio of branded serviced apartment complexes for acquisition purposes. Date 2015 Four Seasons Hotel Prague, Prague Client Avestus Capital Partners Rooms 161 Price Undisclosed guide 80m (approx. AU$117m) Agent Rob Stapleton Date 2014 Radisson Blu, Amsterdam Client Hibernia Worldwide Hotels Investment Fund Rooms 252 Price Undisclosed Agent Rob Stapleton Date 2015 Four ANA Crowne Plaza Hotels, Japan The largest hotel portfolio transaction in Asia for 2015, price not disclosed. Client Morgan Stanley Rooms 1,229 Price Undisclosed Agent Raymond Clement and Christian Mancini Date 2015

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21 20 Savills key contacts Australia International Michael Simpson Managing Director Hotels, Australia & New Zealand +61 (0) msimpson@savills.com.au George Nicholas Global Head of Hotels +44 (0) gnicholas@savills.com Adrian Archer Director Valuation & Advisory Hotels, Australia +61 (0) aarcher@savills.com.au Raymond Clement Managing Director Hotels, Asia Pacific rclement@savills.com.sg Vasso Zographou Director Hotels, NSW +61 (0) vzographou@savills.com.au Nic Simarro Senior Sales Executive Hotels, NSW +61 (0) nsimarro@savills.com.au Iris Liu Assistant Valuer Valuation & Advisory Hotels, NSW +61 (0) iliu@savills.com.au Sara McDonough Team Administrator Hotels, NSW +61 (0) smcdonough@savills.com.au

22 With a rich heritage and a reputation for excellence that dates back to 1855, Savills is a leading global real estate provider listed on the London Stock Exchange. Savills advises corporate, institutional and private clients, seeking to acquire, lease, develop or realise the value of prime residential and commercial property across the world s key markets. Savills is a company that leads rather than follows with over 600 owned and associate offices throughout the UK, Europe, Americas, Asia Pacific, Africa and the Middle East. With over 30,000 staff, we seek out people who possess that rare mix of entrepreneurial flair and rock solid integrity, and are focused on delivering clients with advice and expertise of the highest calibre. A powerful combination of global connections and deep local knowledge provides Savills with an almost unparalleled ability to connect people and property. Savills extensive Asia Pacific network spans 50 offices throughout Australia, New Zealand, China, Hong Kong, India, Indonesia, Japan, Korea, Macao, Malaysia, Myanmar, Philippines, Singapore, Taiwan, Thailand and Vietnam. In Australia, we offer the full spectrum of services from providing strategic advice to managing assets and projects and transacting deals. With a firmly embedded corporate culture that values initiative, innovation and integrity, clients receive outstanding service and can be assured of the utmost professionalism. Savills is expert in delivering results across all key commercial, retail, industrial and residential sectors in the following areas: Sales Leasing Valuations Asset Management Project Management Corporate Real Estate Services Property Accounting Facilities Management Residential Sales Residential Projects Research For Advice that gives Advantage, contact Savills. Adelaide +61 (0) Brisbane +61 (0) Canberra +61 (0) Gold Coast +61 (0) Melbourne +61 (0) Notting Hill +61 (0) Parramatta +61 (0) Perth +61 (0) Sunshine Coast +61 (0) Sydney +61 (0) savills.com.au