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Asian capital supports Australian hospitality sector

By Greg Bell

Hotels, resorts and restaurants play an important role in commercial growth in Surfers Paradise, with the hospitality sector relying heavily on the success of tourism and travel. In great news for the commercial property market in southeast Queensland, offshore investment in the hospitality industry is expected to continue in 2015, with a new report from Ernst & Young revealing that Asian capital is supporting hospitality merger and acquisitions across the country. 

The report, titled Global hospitality insights: Top thoughts for 2015, offers plenty of fodder for investors. Global interest in the hospitality industry is expected to grow over the course of this year, with Asian investors in particular making up a large proportion of these transactions. 

Global hospitality 

The report outlines that worldwide, the hospitality sector is in an ideal position. Michael Fishbin, EY's Global Hospitality & Leisure Leader, said this market having an increasingly positive impact on the global economy, with the travel and tourism industry accounting for approximately 266 million jobs and providing 9.5 per cent of international GDP. 

"We expect the hospitality industry to experience significant growth, development and brand expansion in the coming year. Despite some significant headwinds – such as geopolitical instability, new health concerns and inconsistent economic growth – the global industry is thriving and optimism prevails," he said. 

In particular, merger and acquisitions activity has been trending higher year-on-year in recent times. Transactions across the industry has increased 8 per cent each year through to Q3 2014, with cross-border capital investment dominating this aspect. Fresh capital from new locales – like China, Hong Kong, Japan and Singapore – is creating an attractive market for acquisitions and boosting the number of industry participants. More than 43 per cent of hospitality asset transactions are from these countries, with the number forecast to grow even more over the next year.

The flow on effects from this burgeoning industry are promising for the domestic economy, particularly as growth is predicted to rise by 3.9 per cent this year. There are plenty of opportunities for Australian investors to tap into the rising levels of demand, growth and innovation, particularly in Surfers Paradise. 

Surfers Paradise rides the wave

With the hospitality industry blossoming, tourism asset owners and operators in Australia can grab the chance for further success with both hands. Growth of Asian capital will support mergers and acquisitions in Australia's hospitality sector, which is fantastic news for Queensland. Travel and tourism is driving post-GFC recovery in the sunshine state, with Surfers Paradise reaping the rewards.

The report outlines that Australia's "strong fundamentals, maturity and transparency" have been a drawcard for Asian investors, who see potential yields in the booming market. Australia was a real target for Asian buyers in 2014, with the report revealing that hotel transactions increased 8.5 per cent and development site transactions grew by 180.5 percent during the 12 months to October last year

David Shewring, EY's Oceania Hospitality and Leisure Leader, said that as more investors – both domestic and offshore – pursue real estate opportunities worldwide, the opportunities for lucrative transactions in Australia grow as well.

"Future M&A activity will be driven by a desire for incremental growth among the businesses involved, the strategic merit of transactions and the availability of debt and equity on favourable terms," he said. 

"To continue to capitalise on these opportunities the Australian industry must keep striving to ensure that their strategy has a clear differentiator." 

Global development in hotels is reaching new heights, with 1.3 million new guest rooms predicted. Australia alone is already seeking substantial numbers of new hotel deals and development in the pipeline, with Surfers Paradise experiencing an incredible level of offshore commercial investment into new hotels. Hong Kong-based Wanda Group has poured $970 million into a luxury hotel and apartment complex on the Gold Coast, showing that the Chinese are looking to all corners of the globe for the best deals.

Domestic and international visitors have long been drawn to the sun, surf and sand, but the impressive global growth in the hospitality industry will provide the perfect reason to invest in commercial property in Surfers Paradise. 

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