Investors drawn to booming Queensland tourism market

The Novotel Cairns Oasis Resort.
The Novotel Cairns Oasis Resort.

Hotel investors are focusing their sights on regional leisure assets in a bid to capitalise on the current strength of Australia’s tourism sector.

According to new figures from CBRE, there has been an upswing in hotel investment activity in regional areas, as purchasers seek alternative opportunities to corporate-style hotel investments in the major CBDs.

The figures are a promising sign for the plethora of hotel, tourism and leisure assets in regional Queensland that have come to the market in recent months, including Turtle Island, Kewswick Island, South Molle Island and Long Island Resort.

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According to CBRE, in 2015 about $3.2 billion worth of Australian hotels were transacted, with 77% of that money spent within the CBD markets and only 23% in regional areas.

In 2016 around $1.3 billion in deals have been finalised, with 69% based in the CBD and 31% in regional areas.

Queensland's South Molle Island is on the market.

Queensland’s South Molle Island is one of a number of islands on the market.

CBRE Hotels regional director Wayne Bunz says the figures highlight that investors are turning their attention to regional leisure offerings as a result of both the current tourism boom and the tightly held nature of CBD markets.

The swing to regional investments is even more apparent when analysing the sales figures based on number of sales rather than capital values, Bunz says.

The Gold Coast and Cairns continue to outperform the rest of the country

“Given that CBD hotels are generally much more expensive than regional assets, analysing the sales data by volume rather than value makes the shift even more apparent,” he says.

In 2015, there were 53 hotels transacted nationally, with 60% based in the CBD market and 40% in regional areas.

Comparatively, so far in 2016, 37 hotels deals have been done, with 57% of these based in the CBD market and 43% in regional areas.

Rydges Tradewinds Cairns could be transformed into a six-star resort.

The Rydges Tradewinds Cairns.

In particular, there has been a surge in hotel investment activity in key leisure markets such as Cairns and the Gold Coast, both of which recorded double digit increases in revenue per available room – 15.3% and 11.3% respectively – for the year to March 31, 2016.

“The Gold Coast and Cairns continue to outperform the rest of the country, posting the highest RevPAR growth rates for any major markets,” Bunz says.

“This is consistent with CBRE Research’s view at the start of the year that these two leisure destinations would see the highest growth rates in Australia in 2016.

“Investors are likely to be keeping a close eye on these markets and will look to pick up any assets that come up for sale and benefit from the growth in these regions.”

This has been highlighted by a string of recent sales, including the sale of Rydges Tradewinds Cairns for $34 million, and the Novotel Cairns Oasis Resort for a ­reported $50 million.