While 2016 was a slow deal year for major transactions, there was significant activity involving regional and leisure assets.

Looking ahead, new supply will be a concern in many major markets in 2017.

In Melbourne, it will be hard to drive room rate growth given continued new supply. Strong occupancies are still being achieved but rate growth will be moderate.

In Sydney, the average daily rate will continue to be strong with limited new supply and the new Sydney Exhibition Centre coming on line. This will make Sydney the number one performing hotel market for the next three to five years.

In Brisbane, rates and occupancy levels will remain under pressure given the level of new supply and the lack of major new demand generators. However, with head works starting and road closures now in place for the start of works on the Queens Wharf Redevelopment, the announcement of the $20b Adani Coal Mine and recovering coal and iron ore pricing, we expect that the Queensland hotel market will begin to recover from 2018 onwards.

Counter cyclical opportunities will arise for astute investors in areas such as Brisbane and Perth. However, we expect that most deals done in these markets will be off market deals rather than on market.

Cairns, the Gold Coast and the Whitsunday Island regions will continue to experience a strong recovery in room rates and occupancies as inbound tourism arrivals numbers continue to grow with the lower Australian dollar.

However, until the mining industry fully recovers there may be distressed sales occurring in some areas of Australia as valuations of properties are ordered by the banks. Areas that will be affected will be the sub regional markets like Mackay, Townsville and Gladstone and regional areas of WA in towns that were once thriving due to the mining boom. If one bank moves on owners in these regions other banks will be sure to follow suit.

Natasha Wallis
Communications Manager, Australia
+61 8 9320 0018
CBRE Hotels