On the back of the expansion by all operators – IHG Hotel & Resorts recently opened the Hotel Indigo in Potts Point – the investment market is also heating up.

Australian hotel transaction volumes, as measured by the total value of transactions, grew to $2.494 billion in the 2023 calendar year, according to a new report from Savills Australia and New Zealand. This figure is an increase of over 6 per cent on the prior year, exceeding the total long-term average of $2.1 billion.

The focus on domestic travel is critical, especially as outbound tourism continues to face constraints and cost of living pressures remain.

Ascott MD David Mansfield

The report, which analyses hotel deals over $5 million in value transacted throughout the 2023 calendar year, showed 53 hotels transacted during the period as interest rate rises, inflation and uncertainty dampened investment activity.

Mark Durran, managing director, Hotel Capital Markets at Savills Australia and New Zealand said the biggest impediment for active investors is a lack of major investment-grade hotel assets, especially in Sydney.

Durran said 2024 had started strongly with his team transacting the 273-room Four Points by Sheraton Melbourne Docklands’ hotel for $96 million. Looking ahead, Savills expects an increase in the deployment of cross-border capital into the Australian hotel sector.

“Looking forward to the year ahead, we anticipate similar levels of hotel transaction activity for both major single assets and portfolios driven by well-capitalised strategic investors seeking selective hospitality assets,” Durran said.

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