Restaurants in rooms and long-term leases are just two ways that hotel owners and operators are reinventing their assets on the road to recovery.
“Owners and operators are looking at ways to reposition and re-engineer their business as they come out of COVID-19 and we start to see a road to recovery,” says Ross Beardsell, executive vice president for project and development services for JLL’s hotels and hospitality group.
There are new products, like the “restaurant-to-a-room” which blends fine dining with social distancing. Micro wedding and office zone packages are also showing promise.
Some operators are repositioning their assets in the short-term. Frasers Hospitality, part of Frasers Property Australia, is making its CBD hotel rooms available under lease terms of between three and 12 months. Rooms at Fraser Suites Sydney, for example, start at $600 per week, with residents willing to sign a lease of at least three months given one week rent-free.
Matt Rubie, Frasers Hospitality Group’s Australia general manager, says “resilience and diversity” are important characteristics during the COVID-19 era. He urges hoteliers to “get out there” and “test the market”.
While new ideas come to the fore, old ideas are falling away. Rubie says the breakfast buffet may have had its day. “We’re certainly not going to be offering it any time soon.” And the minibar – which “has always been a little bit of a challenge” – is ripe for reinvention.
“Room service has evolved to essentially take-away business, so it’s no more the trolley delivery to the room,” Rubie adds.
The time is ripe for renovation
Beardsell says soft trading conditions presents opportunities for hotel owners to undertake refurbishments “that would otherwise be disruptive works during full occupation”. The conclusion of the JobKeeper package will be a “trigger” for the majority of hotel employees to return to work.
“So between now and the start of October, there are opportunities for hotel owners and operators to undertake works that may have been in the planning for a while and put on hold until the operating environment stabilised.”
Beardsell says the hotel industry is “now starting to see a road to recovery,” but it will be a “domestic-led recovery”.
“Initially, it’ll be your drive market and then we’ll look at the market rediscovering Australia,” Beardsell says.
“And we are now seeing evidence in Sydney of the corporate market coming back as well. While the numbers are small, it’s positive to see that companies are starting to travel from Melbourne to Sydney.”
Hope for hotels on the horizon
Meanwhile, Australia’s hotels remain an attractive long-term investment, says Peter Harper, executive vice president for JLL’s hotels and hospitality group.
Australia has “historically been considered a flight to quality market in times of uncertainty” and this reputation has been “considerably enhanced” by the federal and state government response to the crisis, Harper says.
Despite the “noticeable investor appetite”, the majority of Australian hotel owners are “incredibly well capitalised and have the necessary equity to work through the current challenges”. This means it is likely asset owners will delay divestment decisions.
“As such, with year-to-date transaction volume currently sitting at around $250 million, we have now reduced our full year forecast to just $500 million,” Harper says.
JLL expects transaction activity to pick up considerably towards the end of 2020 and into 2021.
“You only have to look at what occurred in the Australian hotel investment market as a result of the GFC to get a sense of what is likely to occur in the short term,” Harper says.
“Whilst the slowdown is different from 10 years ago, the attractiveness of the market as a whole and the fact that the exchange rate is making Australian real estate look cheap, should again see investors from traditional and emerging offshore capital sources compete strongly for hotel investment opportunities, both in the capital cities and major leisure markets.”
Learn more about the hotel trends on the horizon in a podcast hosted by JLL and Frasers Hospitality.