Fragmented Australian accommodation ownership.
Friday, 28th March 2008
Source : Jones Lang LaSalle Hotels
Across Australia there are 216,845 accommodation rooms with the Top Ten Owners accounting for approximately 12% or 27,209 rooms.

According to Jones Lang LaSalle Hotels' annual Top Owner Survey, while the top ten hotel owners have increased their room count by 24% since 2000, as a proportion of total room supply in Australia this has increased only marginally from 11% to 12%.

This is in spite of over $9 billion of major hotels (with a value above $5 million) transacting over the same period.

"Accommodation ownership is very fragmented and the introduction of serviced apartments, as well as the separation of ownership and operating companies, has only exacerbated this," said Mr David Gibson, CEO Asia Pacific, Jones Lang LaSalle Hotels.

Whilst hotel operators are exiting the top ten list, they're being replaced by Australian investment funds.

Some partnerships have emerged however operators are managing more owner relationships than previously seen.  "Many of the top owners, such as The Schwartz Family Company and Abacus Funds Management, own properties that are operated under a number of brands," said Mr Gibson.

Only three major players remain in the top ten list when compared to 2000 - Babcock & Brown-run Tourism Asset Holdings Limited (TAHL), Thakral Holdings Limited and GPT Management Holdings Limited.

TAHL continues to dominate the ownership of Australia's tourist accommodation market and has long had a relationship with Australia's largest hotel operator – Accor Asia Pacific Corporation (AAPC).  "TAHL owns 6,032 rooms across 40 hotels and their leading position has been reinforced through recent acquisitions including the Novotel St Kilda and Mercure Parramatta," said Mr Gibson. 

Mirvac Funds Management has sky rocketed up the Top Ten Owner list over the last two years.  "Mirvac's full ownership of Property Funds Australia (PFA) during 2007 secured them as Australia's 2nd largest owner of hotels," said Mr Gibson.  He added, "PFA had only just purchased the 275 room Hotel Grand Chancellor Perth themselves in June 2007."  Mirvac was Australia's 15th largest owner of tourist accommodation assets in 2005 however now boasts 4,362 rooms across 22 hotels.

Despite no further additions to its hotel portfolio during 2007, Eureka Funds Management maintains its position in 3rd spot with 2,726 rooms across 10 hotels – all managed by InterContinental Hotels Group aside from Four Seasons Hotel Sydney.

While Australian funds and institutions dominate the Top Ten Owner list, The Schwartz Family Company is a private hotel investor rapidly expanding its portfolio of quality assets.   "Following its acquisition of the Avillion Hotel Sydney during 2007, which added a significant 445 rooms to its portfolio, Schwartz jumped an impressive three spots and is now Australia's 6th largest owner of hotels," said Mr Gibson.

Grand Hotel Group (GHG) dropped off the Top Ten list following the sale of its portfolio in 2007 to Morgan Stanley and Tuan Sing.  "ASX-listed GHG took advantage of surging room rates and limited new hotel supply to accept the takeover offer and subsequently divest three Rendezvous managed hotels that were no longer a strategic fit for the Group," said Mr Gibson.

Domestic investors remain the dominant owner of hotels in Australia.  "This represents a significant change, considering Australian based owners only accounted for 50% of rooms in the Top Ten in 2000," said Mr Gibson.  He added, "Thakral Holdings and Stamford Land Corporation, both of which are Singaporean owned, continue to hold significant interests throughout Australia," said Mr Gibson.

In 2008 acquisition activity is expected to slow from the 2007 high of $1.63 billion.  "Despite strong growth in income performance and a high level of interest in the sector, we anticipate a gradual shift towards development over the next few years to meet the expected demand for hotel accommodation," said Mr Gibson.  The Australian hotel development pipeline (across 10 major markets) is now at its highest level for some time - 6,700 rooms. 

Jones Lang LaSalle Hotels Top Owner Survey is the largest survey of its kind, analysing approximately 120 major hotel owners (100% ownership) and over 60,000 rooms.

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