Sydney’s hotel inventory to grow by 5.7% this year | Real Estate Asia
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Sydney’s hotel inventory to grow by 5.7% this year

There are five new hotels currently under construction in the CBD.

According to a JLL report, a total of 230 rooms opened in the first quarter of 2023, representing 1.0% of total room stock. These included the 192-room Capella Sydney located in the CBD and the 38-room boutique hotel, 202 Elizabeth (formally The Clancy) situated in Surry Hills. 

JLL added that five new hotels are currently under construction in Sydney CBD and the surrounding fringe suburbs, representing a net increase of 1,267 rooms or 5.7% on existing stock. It is expected that future new development activity will be relatively subdued over the near term, given the current interest rate environment and construction costs on the rise.

Here’s more from JLL:

As at YTD March 2023, revenue per available room (RevPAR) increased to sit at AUD 248, which represents a 134% increase from the previous year, and has been heavily supported by a strong recovery in market occupancy (77% y-o-y). Despite this, occupancy remains 13% down on pre-COVID-19 levels (YTD March 2019), however RevPAR has now recovered to be 4% above pre-COVID-19 levels.

Sydney recorded the strongest investment volumes of any city in 2022, with over AUD 1 billion of transactions (across eight deals) settling over the year. Momentum has continued into 1Q23, with the significant trophy transaction of the future Waldorf Astoria currently under construction, for a reported AUD 520 million. 

Outlook: Recovery expected to accelerate, despite current headwinds

Sydney is expected to benefit from a significant events calendar over the coming 12 months, which will continue to support accommodation demand over the near term. This will also support trading conditions with positive occupancy levels and strong ADRs. Visitor arrivals are anticipated to continue recovering to pre-pandemic levels as international and Chinese visitation returns.

Whilst the direct effects of COVID-19 have now eased, the market is facing other challenges such as supply chain disruption, a high inflationary environment and staffing shortages. Despite this, investment appetite in Sydney remains strong but selective, especially for trophy assets or non-performing assets with upside potential, be that through refurbishment, repositioning, or redevelopment.

Note: Sydney Hotels refers to all grades of accommodation and includes both hotels and serviced apartments.

 

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