Research and Analysis Report 2017/18
Investment demand for New Zealand hotel assets remain at an all time high from both offshore and domestic investors. However, opportunities remain scarce as hotel assets remain tightly held with owners electing to retain, based on buoyant trading conditions and further capital appreciation expectations.
- Over the 24 month period ending December 2018, transaction volumes declined compared to the two year period 2015/16. There were a total of 19 hotel sales in the wider New Zealand market totalling approximately NZ$300 million compared to 29 sales totalling more than NZ$500m over the 2015/16 period.
- The majority of sales (by number & value) took place in the second half of 2018 when 7 hotels transacted at a total value of NZ$168 million.
- Major sales included the Waldorf Stadium Apartment Hotel, Auckland, Best Western President Hotel Auckland, Auckland, CQ Hotels Wellington and the Novotel New Plymouth.
- The sale of the Waldorf Stadium Apartment Hotel was the largest hotel transaction in New Zealand since 2015 and the first major hotel to be sold in the Auckland CBD since the Hilton Auckland in 2012.
- Nationally, offshore investors accounted for approximately 58% of all transactions by value, evenly spread between Australia, Singapore and China. However, domestic investors accounted for the largest number of transactions by volume with ten (10).
- Auckland was the most sought after place for investment representing 43% of all transactions by volume followed by Wellington (18%).
- Heightened investment activity has also spread into provincial New Zealand where investors are seeing attractive returns on the back off improving fundamentals. Over the 2017/18 period, there were 7 regional hotel transactions for a total of circa NZ$70 million.
- Hotel yields continue to firm on the back of strong trading fundamentals, increasing investment demand, acute shortage of prime hotels available for sale, high costs associated with new development and yield compression in other major asset classes.
- Recent sales in New Zealand support a compression in yields of approximately 100 to 150 basis points, over the past 24 months, particularly in Auckland and Queenstown.