ANZ Capital Markets Investment Review
An uptick in activity during the last quarter of 2020 saw transaction volumes total just over $900 million for the year and with a number of larger deals still currently in play. Total annual transactions were well below the long-term average of $1.6 billion and the lowest annual transaction volume since 2008 at the peak of the Global Financial Crisis (GFC).
Deal flow has primarily comprised smaller assets being acquired by private investors with only two transactions above $100 million. The average ticket size averaged $34 million, a decline of 25 per cent compared to 2019, whilst the average price per key declined 32 per cent to $225,828, reflecting the composition of deals throughout 2020.
Private investors have dominated both buy-side and sell-side activity. Developers were the second most active investor group on the sell-side as they have looked to dispose of newly developed hotels and recycle capital into new development projects. Conversely, hotel owner operators emerged as the second most active group on the buy-side, reflecting their ongoing confidence in the Australian hotel sector.
The ongoing active role of foreign capital in Australia’s hotel investment market will continue to be crucial to underpinning valuations over the near term. Offshore groups have accounted for over half of the capital invested over the last 20 years and are playing a more active role in the development of new accommodation stock. The closure of international borders is restricting business as normal with a reluctance by foreign investors to commit capital without undertaking a physical inspection. Throughout 2020 this was further compounded by the slowing of FIRB approvals with thresholds reduced to zero.