Australia has seen a great increase in foreign visitors in the past decade and where Chinese tourists have played a vital role in the hotel industry.
Without facing a recession for decades, we’ve seen a slowing market recently and 2020 was one of the worst years with no further explanation needed.
Yet, this also leaves room for investment opportunities as firms and HNWI’s look for low price points in large-sized hotel projects.
Due to the increased interest in Australia hotels, I decided to write this article and where we review the following:
- Can foreigners buy hotels in Australia?
- Hotel Development Regulations in Australia
- The Hotel Market in Australia
- Best Cities for Hotel Investments in Australia
Can foreigners buy hotels in Australia?
Australian ownership regulations bring many similarities to New Zealand and you generally don’t have any issues to buy hotels as a foreigner.
Sometimes, approval is needed from the Foreign Investment Review Board (FIRB) depending on the property value and your country of residence. But FIRB has only rejected a few cases since the regulation was introduced.
In short, FIRB’s role is to help foreigners understand local investment requirements and they also advise the government on investment policies.
They review the following when assessing whether any approval is needed when foreigners buy real estate:
- If you’re a private investor or buy on behalf of a government
- The property type
- If you come from an FTA-partner country of Australia
- The property value
For more information, I recommend you read my separate article that explains how you can buy commercial property in Australia as a foreigner.
Hotel Development Regulations in Australia
According to the Australian Trade and Investment Commission, different regulations apply pre-construction and during construction.
The regulations are similar between states, but in this article, we will review the regulations in Sydney. We will also focus on the central business district and the requirements during construction.
The reason is that most foreign investment and consultancy firms that contact us primarily help large-sized hotel operators and investors to buy completed or partly completed hotels in the major cities.
On-Premises (Liquor) License
As you cater to international and local travelers, you have to prepare an on-premises license.
Talk with your lawyer and the other stakeholders involved to prepare a so-called Community Impact Statement (CIS). The cost to apply for a CIS is around AUD 25,000 and the agencies involve include:
- The local police
- NSW Department of Health
- NSW Department of Community Services
- Roads and Maritime Services
- Recognized leaders of the local Aboriginal community (if any)
- The occupier of any neighboring premises within 100 m of the boundary
- Special interest groups or individuals
The agency that grants the Liquor License is the Office of Liquor Gaming and Racing.
Plans of Management
The next phase is the plans of management and there are four steps involved:
- Visitor and tourist accommodation – plan of management
- Licensed premises plan of management
- Coach parking management plan
- Footway license approval and plan of management
The City of Sydney is responsible for the Plans of Management.
Health and Building
The NSW Food Authority is the responsible agency for this step and where they require health database registration of the food premises.
For more information and more details about what regulations apply for each city, I recommend you to visit the Australian government’s website.
Keep in mind that the above are only examples of regulations that foreigners have to comply with. If you plan to invest in hotels in Australia, you can also contact us for more information.
The Hotel Market in Australia
Australia has attracted many tourists in the past decade and we have seen particularly strong demand among Chinese investors and travelers.
To back up this statement, let’s have a look at the following numbers:
- In 2018, Australia received as many as 9 million visitors from overseas, an increase of 65% compared to a decade ago
- The Australian dollar has remained low in previous years, something that has benefited and encouraged travelers to visit the country
- We saw slower growth in 2019 and 2020 was undoubtedly one of the worst years due to the COVID-19 pandemic. The market is predicted to remain weaker compared to a few years ago
- Domestic traveling has remained strong and overnight trips within the borders have increased faster than international trips
RevPAR Changes for Major Cities
There are currently more than 57,000 rooms in the pipeline until 2028, coming from 332 new projects.
Hobart saw the best RevPAR (Revenue Per Available Room) in 2019 with an increase of 7.9% compared to 2018. Other cities saw the following changes:
- Sydney: -4.5%
- Melbourne: -2.4%
- Gold Coast: -7.7%
- ACT: -4.8%
- Adelaide: -1.9%
- Perth: -3.8%
- Brisbane: +0.6%
Best Cities for Hotel Investments in Australia
Australia is the home of many interesting cities that you can consider for hotel investments. Not only should the major such as Sydney and Melbourne be of interest.
Upcoming cities like Hobart become increasingly interesting as investors target other destinations in the country. With that said, I will primarily focus on Sydney, Melbourne, Perth, and Brisbane in this article.
Let’s see how the four cities have performed and what the predictions are for the future.
Sydney is expected to be one of the best performers in terms of RevPAR (revenue per available room) until 2027. We have also seen the greatest growth here, except a somewhat steep RevPAR decrease from 2018 – 2019.
Here, the RevPAR is expected to grow from around AUD 240 – AUD 310 here until 2027, averaging some of the highest growths.
With that said, in January 2019, revenues were -7% lower compared to a year ago due to the start of the COVID-19 pandemic and bush fires. January 2020 was the 25th consecutive month of occupancy declines for Sydney.
Even if hoteliers were forced to cut prices due to an increase in supply during 2020, Sydney is predicted to see some of the greatest returns in the coming decade.
Experts believe that Melbourne will see a modest RevPAR increase until 2024, but start to climb from 2024 – 2027.
The RevPAR will remain almost flat from 2020 – 2024, averaging at around AUD 160. Thus, the rates are comparatively low to Sydney.
Melbourne has also struggled with increased supply and reduced demand due to economic uncertainty, bush fires, and the ongoing COVID-19 pandemic.
The RevPAR is expected to grow to around AUD 210 in Melbourne by 2027.
Brisbane has performed well in the past years, fueled by the strength of trade in key leisure markets. Queensland has been the most active hotel investment market in the past years with a value averaging at AUD 491 in 2018.
In late 2019 and before the COVID-10 outbreak, Brisbane became one of the top 3 RevPAR markets. Besides, by 2023 we will see 7 new hotels open here, increasing the number of rooms by 1,270.
Both Sydney, Melbourne, and Brisbane have been the most active markets and this will continue in the coming years.
Below I have included some commonly asked questions and my replies.
How can I find hotels for sale in Australia?
You have many options when looking for hotels for sale in Australia. You can check listing websites where agents list hotels for sale continuously. One of the drawbacks of looking for listings online is that the agent only has one or limited options available.
Your second option is to appoint a partner who is specialized in commercial real estate, has a credible track record, and that can present multiple options at once.
Which city has the highest RevPAR in Australia?
Sydney has the highest RevPAR in Australia and is followed by Melbourne, Perth, and Brisbane. The RevPAR is predicted to reach the following numbers by 2027:
- Sydney: Around AUD 310
- Melbourne: Around AUD 210
- Perth: Around AUD 180
- Brisbane: Around AUD 180
What are the biggest real estate agents in Australia?
Australia is the home of dozens of reputable real estate agents, some have operated for more than a hundred years. The agencies are often experienced in catering to foreign buyers. Some of the biggest and most well-known names include:
- Ray White
- LJ Hooker
- Century 21
- Raine & Horne