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The significant impacts of COVID-19 are expected to result in a cyclical low in national hotel sales volumes this year, as investment contracted over the sector’s most challenging period in history. The initial severe impact on trading conditions, coupled with the future trading uncertainty associated with materially reduced international and domestic travel, saw a hiatus in investment activity over the first half of 2020. With many investors adopting a ‘wait and see’ approach, we also observed some divergence in value expectations between buyers and vendors across active deals, as well as a preference for existing hotel owners to hold firm until trading conditions improved.
 
CBRE Hotels have analysed the recent sales activity which is underpinned by mandates to acquire assets representing worthy yield opportunities over the medium term, as trading markets gradually recover. The restart in investment activity is seeing hotels being transacted within tightly held markets as purchasers look to capitalise on these rare market opportunities.

Key trends are summarised below:  
  • The significant impacts of COVID-19 are expected to result in a cyclical low in national hotel sales year in 2020, as investment activity contracted over the sector’s most challenging period in history. 
  • Around $670 million in volume is expected over 17 transactions over the full year, which is 63% lower than the 10-year average annual sales volume of $1.8 billion.
  • Sales activity in 2020 has been characterised by asset purchases within tightly held CBD and some suburban markets. Observed price discounts across these assets range between 5% to 15% on estimated pre-COVID values.
  • With most lending institutions still cautious in issuing new debt to the sector, liquidity conditions are expected to gradually improve for hotel investors in 2021 as global investment continues to be underpinned by record-low interest rates and central bank quantitative easing policies. 
  • As such, we expect an active hotel transaction market over the course of 2021/22, which will be driven by interest in a number of high-quality assets brought onto the market, as well as building momentum from an emerging weight of international and domestic capital seeking value in new deals with medium term yield prospects in a world starved of yield opportunities. 
If you have any questions, please feel free to contact us.
Chinmay Chitale
Research Manager,
Hotels Research
+61 430 583 128
chinmay.chitale@cbre.com
Troy Craig
Regional Director,
Valuation & Advisory
+61 439 398 769
troy.craig@cbre.com
Michael Simpson
Managing Director,
Capital Markets
+61 431 649 724
michaelj.simpson@cbre.com
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