Investors check into hotels in 2026 as beds fill, cranes dwindle

Growing tourist numbers, slowing construction and other factors are boosting the appeal of Aussie hotel and leisure real estate in 2026, experts say.

Australia’s hotel and leisure property market has been in recovery mode since the pandemic, with deal volumes and occupancy rates on the rise.

It’s a popular asset class among property investors, covering everything from five-star trophy hotels to boutique accommodation and neighbourhood pubs.

International visitor arrivals grew 7% in Australia in 2025. Picture: Getty

CBRE’s Pacific head of hotels Michael Simpson said investors spent much more on hotel and leisure real estate last year compared to 2024.

“Offshore investors, particularly from Asia, played a much larger role in hotel acquisitions in 2025 compared to 2024,” Mr Simpson said.

Last year, there were a series of transactions above $100 million, including marquis assets like Intercontinental Double Bay Sydney, Hilton Adelaide and Park Hyatt Melbourne.

CBRE’s Michael Simpson says investors spent much more on hotel and leisure real estate in 2025 compared to the prior year. Picture: Supplied

Hotels welcomed more guests last year too, with occupancy rates rising year-on-year in every major location except for Brisbane and the Gold Coast.

“Demand for Australian hotels is experiencing considerable growth from a diverse set of sources, with international inbound, domestic leisure and domestic corporate segments all delivering strong growth,” Mr Simpson said.

This was driven in part by rising international visitor arrivals which grew 7% in Australia in 2025, led by tourists from China, United Kingdom and New Zealand, according to CBRE.

Thai hotel group Amora Hotels and Resorts acquired the Hilton Adelaide hotel last year. Picture: Supplied

Hotels recorded solid trading performance in most major markets in Australia in 2025, with key metrics such as revenue per available room (RevPAR) and average daily rate (ADR) higher year-on-year, according to Savills national director of hotels Nicholas Lower.

“All major capital cities recorded RevPAR growth in year-to-date October 2025, with the exception of the Gold Coast, which was impacted by a one-off weather event,” he said.

“Several markets, including Brisbane, Perth, Cairns and Darwin, have now surpassed pre-COVID occupancy levels, while Sydney is expected to exceed 2019 performance by the end of 2025.”

Savills’ Nicholas Lower says Aussie hotels recorded solid trading performance in 2025. Picture: Supplied

Sydney led the way, with the highest occupancy rate at 83% in November last year, along with the most expensive ADR ($330) and RevPAR ($275), according to CBRE.

It also experienced some of the strongest year-on-year growth, with RevPAR up 8% and occupancy up 5%.

The uptick in demand comes as CBRE and other market watchers predict a period of very low supply across all capital city markets over the next five years due to elevated construction costs and competition for alternative land uses.

The Aussie hotel supply pipeline delivered 10% fewer rooms in 2025, while there were 14% fewer rooms under construction compared to a year ago, CBRE reported.

KS Hotels purchased Melbourne’s Park Hyatt hotel last year. Picture: David Crosling.

While 5,560 rooms were under construction and scheduled for completion over the next two years, there were just 724 rooms scheduled to be finished in 2028, tracking below medium-term requirements.

Andrew Jolliffe, director of Asia Pacific region at HTL property, said the supply constraints were contributing to the appeal of hotels for investors.

“Supply will continue to remain constrained by a combination of increasing legislative compliance requirements, and the cost of construction; rendering existing form hotels enthusiastically sought after; and consequently applying downward pressure of yields,” Mr Jolliffe said.

Mr Simpson said Australia’s reputation as a safe haven would also appeal to investors in 2026.

HTL Property’s Andrew Jolliffe says supply constraints are contributing to the appeal of existing hotels for investors. Picture: Richard Dobson

“As asset level performance continues to improve and supply remains constricted, coupled with the attractiveness and safety of Australia as an investment destination, we anticipate a steady increase of transaction volumes in 2026,” Mr Simpson said.

Mr Lower noted that hotel occupancy recovery was boosting investor confidence in the asset class.

“As ADR growth moderates from the post-pandemic rebound, investors are placing greater emphasis on sustainable income growth driven by occupancy recovery,” Mr Lower said.

“This is supporting renewed confidence in hotel cash flows and is expected to translate into stronger transaction volumes through 2026, particularly for high-quality assets in markets with resilient demand fundamentals.”

Mr Lower said markets demonstrating strong demand fundamentals and an ability to absorb new supply were best positioned heading into 2026, highlighting Brisbane and Perth among others.