City hotels are drawing the attention of global investors with Chinese behemoth Sunshine Insurance Group eyeing Sydney’s Sheraton on the Park for a record $465 million.
While Sunshine Insurance — one of China’s top 500 companies — is in the box seat, it must still beat off other international bidders to buy the hotel overlooking Hyde Park from the US hospitality group Starwood Hotels and Resorts which is exiting hotel ownership.
The cashed-up Abu Dhabi Investment Authority and US group Host Hotels & Resorts have also looked at buying the 557-room Elizabeth Street hotel, which has benefited from an upsurge in international leisure and business tourists and has been reporting above average room occupancies of more than 90 per cent over the past few months.
Further out, Singapore-based tycoon Bobby Hiranandani is developing an InterContinental in the ritzy Sydney suburb of Double Bay, while Michael Kum, the famed Singaporean investor, is so pleased with his 683-room Four Points by Sheraton Hotel investment in Sydney’s Sussex Street that his company, M&L Hospitality, plans to increase its size to 913 rooms by next year.
In further signs of Asian domination of city hotels, Korean group Mirae Asset Global Investments paid $340m for the Four Seasons in Sydney’s The Rocks last year.
In Melbourne, Singaporean developer Hiap Hoe is building a Four Points by Sheraton in the Docklands, opening in 2017. Hiap Hoe will manage a second property in the Melbourne CBD under Starwood’s Aloft brand.
There is little doubt the real interest from Asia in capital city hotels is because they are performing so well, delivering some of the highest yields in the OECD, said Tourism Australia chairman Geoff Dixon yesterday.
“Tourism in Australia is very much on the move, there is no doubt much of the tourism we are getting is high-yield tourism and they are looking for good accommodation and that makes hotels in our cities attractive to overseas investors, particularly from Asia.”
Starwood has said that it will only sell the Sheraton on the Park to a buyer who will allow it to continue to manage it on a long-term agreement of up to 50 years.
The hotel generated earnings of about $27m last year and that is expected to climb to $29m this year. Property executives said the forthcoming sale would be a high-water mark for the sector.
The buyer also has to commit to a substantial upgrade of the hotel within the next three years, which the Chinese group could fund. It is thought to be confident about purchasing the hotel after missing out on the Sofitel Sydney Wentworth, which was bought in May by Frasers Centrepoint for $202m. While both ADIA and Host Hotels have deep ties with Starwood, their executives were less confident about winning the hotel, sources said.
Although Starwood announced this year it would exit hotel ownership in Australia, it wants to increase its management of hotels in the country.
Starwood executives declined to comment yesterday while Jones Lang LaSalle Hotels chief executive Craig Collins was in Singapore and uncontactable.
Sunshine Insurance Group would also not be drawn on its expected acquisition of the Sheraton on the Park, which would be its first Australian property purchase.