Ready with the ‘no vacancy’ signs

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Australian Financial Review, 03 March 2011

Australia’s major hotel owners are expected to hold on to their assets this year, as they prepare to benefit from a large increase in occupancy and room rates.

Jones Lang LaSalle Hotels, in its Top Hotel Owner and Operator report, says it expects few reductions in portfolio size among the sector’s leading players this year.

This meant growth opportunities would also be limited with few owners or operators likely to undertake wholesale portfolio sales, JLL Hotels says.

Most hotel markets were expected to continue to recover this year from the financial crisis, with negligible amounts of new supply and higher demand from the conference and corporate markets putting pressure on existing hotels.

However, conditions in resort markets were expected to remain lukewarm, as the stronger dollar pushes more domestic tourists to holiday abroad and discourages international tourists from coming to Australia.

Deloitte Australia’s head of tourism, hospitality and leisure, Rutger Smits, said the market was expected to post double-digit room-rate growth and he anticipated stronger market conditions in coming years. “The market has remained strong throughout the financial crisis,” Mr Smits said. “We were in a very strong position before the financial crisis hit and were in a pretty steep increase in room rates to start with. But the global financial crisis slowed it.”

Tourism Asset Holdings was the biggest hotel owner in December 31, according to JLL Hotels, with 2969 rooms under management, despite shedding 24.3 per cent of its portfolio through the sale of five properties, including the Novotel and Ibis hotels in Perth and Brisbane.

Mirvac and the private group Schwartz Family Company, headed by BRW Rich 200 member Jerry Schwartz, followed.

The top 10 owners narrowed their market share in 2010, to 11.6 per cent from a peak of 12.6 per cent in 2008.

JLL Hotels believes the lack of new supply could help existing hotel owners and operators keep their stranglehold on the market.

“New entrants, however, are likely to be held back by limited opportunities being put to the market, especially in Sydney and Melbourne, with these markets often required as the entry point to Australia,” the report says.

Accor Asia Pacific, the owner of the Mercure brand, is the biggest hotel operator in Australia, with 21,807 rooms across 153 hotels at December 31, followed by Mantra Group and InterContinental Hotels. Mercure added to its portfolio this week when Australand appointed it to operate the Kings Cross hotel formerly known as The Crest.

Rutger Smits was the National Leader for Tourism, Hospitality and Leisure at Deloitte until October 2011. He now manages his own hotel consulting business, AHS Advisory

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