Colliers International have released their second Australian Hotel Investor Sentiment Survey in June 2020. The survey found that all markets recorded a marked improvement in sentiment when compared to the April 2020 results.
Colliers’ survey found that investors expect Q3 2020 to be the weakest quarter for hotel trading in Australia, with sentiment for trading averaging -5%, compared to -79% in the April 2020 survey. This represents a marked improvement in sentiment and highlights Australia’s success at managing the crisis over the past two months.
Melbourne recorded the lowest sentiment in improvement as concerns rise around the growing number of daily cases in Victoria; The survey was conducted prior to the recent border closures between Victoria and New South Wales.
Trading is expected to improve during the fourth quarter as restrictions relax further and daily life normalises, with sentiment weighted in favour of positive trading at 29%, underpinned by the domestic segment. Early signs of corporate recovery are expected, with trading sentiment for this segment slightly positive at 6%.
Gus Moors, Head of Hotels at Colliers International said, “Improvements are expected to continue through 2021 with growth in the domestic segment initially and the slow return of international visitation through the second half of the year.”
“Investor opinion is weighted firmly towards room rate declines in 2021 of between 0 to 10% when compared to 2019, though more than one third of respondents expecting average rate declines to be more significant at between 10% and 30%, reflecting the lack of compression nights in the market.”
“Unsurprisingly income is expected to take a material hit in 2020, but the demand environment is anticipated to improve through 2021 and beyond.
“Investor expectations for hotel cap rates in Australia averaged 6.8% across all ten accommodation markets, which reflects no change when compared to our April survey and with no transaction evidence to suggest otherwise.”
Investors signalled an uptick in ‘buy’ sentiment compared to April 2020. Karen Wales, Director, Hotels at Colliers said, “More than one third of investors saying their primary investment activity will be to ‘buy’. Buy intentions are highest for Sydney (42.4%), Darwin (41.7%) and Perth (41.2%).”
“The strong ‘buy’ intention has also been evidenced in recent Colliers sales campaigns with multiple bids received for Sydney hotels offered to market.”
“On the whole, investors believe that government support for the sector has been very effective but continuation of the JobKeeper program was highlighted in our survey as the single most important immediate action for government.
“Hotel investors believe that 40 to 50% of the hotel workforce are at risk of redundancy should JobKeeper not continue beyond September 2020. An extension of this program will enable the sector the time it requires to recover and re-build. A decision on the program is expected on July 23rd.”