Fall-off Rate Good For Hoteliers
Sydney Morning Herald
Saturday April 3, 2004
The conversion of hotels to apartments and low demand for new rooms has led to an 8.1 per cent drop in development in the sector during the past six months.
Data from Jones Lang LaSalle Hotels' National Development Register shows the fall-off in construction is tipped to lead the troubled industry into more positive territory in the year ahead.
Fuelling this hope is the lack of supply on the horizon, with only the newly refurbished Hilton Hotel coming onto the Sydney CBD market this year.
However, on the investment front, the listed hotel and leisure sector remain the poorest performing compared with the traditional retail, office and industrial listed property trusts.
In its 10th annual Listed Property Trust survey, the accountancy firm BDO says of the 44 trusts surveyed, the highest ranking in financial performance, disclosure and management expertise, was Macquarie Leisure Trust at No. 11.
Property trust analysts have forecast further merger and acquisitions among the few listed hotel trusts during the next 12 months. Already, Grand Hotel Group has seen about 24 per cent of its register change hands, with investment bank Babcock & Brown snaring a strategic 14.9 per cent stake.
James Fielding group is also moving into the sector as a major owner and investor with the launch recently of its Tourist Park Fund, which is an unlisted, sector specific fund investing in the real estate component of tourist parks throughout Australia.
The fund has already bought a freehold interest in The Palms Village Resort, Palmerston, Darwin, Northern Territory for $15.2 million. It is a four-star facility, comprising 20 motel rooms, 135 cabins and 360 caravan sites, covering 11.25 hectares.
It is intended the new fund will buy further tourist parks. James Fielding's managing director, Greg Paramor, said the launch of the fund continues the James Fielding Group's aim to offer high-quality unlisted property funds to investors.
``The tourist park industry has experienced exceptional growth in recent years and is fast becoming a key sector within the tourism industry. Much of the growth in the industry has been fuelled by retirees, who are embarking on their lifetime dream of travelling around Australia," Mr Paramor said.
But amid the ownership and management turmoil of the properties, with fewer developments coming on stream, the hotel manager's concern of falling room rates is being allayed.
The Jones Lang LaSalle Hotels' National Hotel Development Register, which tracks major tourist accommodation development in Australia's key markets, said that across the 10 major markets, there were 3037 hotel and serviced apartment rooms under construction and a further 1362 rooms considered likely to be built over the short to medium term. Under this scenario, projects under construction and proposed will increase room supply by 3.8 per cent and 1.7 per cent respectively.
Geordie Clark, the managing director of Jones Lang Lasalle Hotels, said Sydney's room supply would be further boosted by the soon to be reopened Hilton, which closed for refurbishment. ``However, even after these rooms are added, room stock in Sydney will be 2000 less than the peak in supply which occurred during the year 2000," Mr Clark said.
``While hotels can be bought at a discount to replacement cost and as prime sites become scarce, acquisition will remain a cheaper option than development."
He said serviced apartments remain the dominant form of new supply additions, accounting for nearly 60 per cent of rooms under construction.
``This accommodation type has increased its share of the national tourism market from 11.5 per cent when serviced apartments were first independently analysed to 19.7 per cent as at September last year. ``This may change as investors' appetite for residential and residential related property weakens. In fact, serviced apartments only represent a quarter of proposed developments."
© 2004 Sydney Morning Herald
