Australia’s hotel market is on track for a banner year, propelled by an unprecedented influx of first-time investors eager to capitalise on the sector’s resilience, growth potential, and attractive returns.
According to Colliers’ Australian Real Estate Investment Review and Outlook 2025, new entrants accounted for 48% of investment volume last year – the highest proportion on record.
The surge reflects rising confidence in the sector’s strong operating performance, attractive risk-adjusted returns, and built-in hedge against inflation.
Meanwhile, governments in Tasmania and Queensland also turned to hotel acquisitions as part of their strategy to combat the ongoing housing crisis, particularly for key workers in essential industries.
Karen Wales, Colliers’ Head of Hotel Transactions Australia, said the findings underscore heightened optimism about the sector, despite pressures on consumer spending.
“The resilience in travel intentions highlights Australians’ strong demand for travel, which is a positive sign for the hotel market,” she said.
Domestic and Offshore Capital on the Rise
Domestic capital continued to dominate in 2024, with high-net-worth individuals, family offices, and investment funds accounting for up to two-thirds of all transactions.
However, offshore capital made a strong return in the second half of 2024, with global funds and Singapore-based investors ramping up acquisitions in Brisbane and Hobart.
This reflects growing international confidence in Australia’s hospitality market.
Ms Wales expects offshore investment to accelerate further in 2025, with Sydney emerging as the prime destination for global capital.
Tourism Recovery Fuels Demand
Australia’s tourism recovery is gathering momentum, with 7.5 million international arrivals recorded in the year ending September 2024, according to Tourism Research Australia.
This upward trend is set to continue, driven by increasing international holidays and domestic business travel.
Major events in Sydney, Melbourne, Brisbane, and Perth will also be key, attracting international visitors to Australia’s world-class cultural, sporting, and business events.
Ms Wales said room rates remain elevated across all markets compared to 2019, with growth ranging from 50.6% in Brisbane to 13.6% in Melbourne’s luxury segment.
Strong average daily rates and high occupancy levels will continue to sustain robust revenue per available room across major markets.
What’s in Store for the Year Ahead
While growth in 2025 may be moderate, investor appetite remains high, and hotel transaction volumes are projected to average $2.2 billion, according to Ms Wales.
Ms Wales said new CBD hotel developments are outperforming older properties, prompting many owners to consider major refurbishments.
Prices for in-demand hotels are expected to stay strong, but newly developed stock and secondary assets may face mounting pricing pressure.
“Transaction activity is set to accelerate through 2025, driven by expectations of falling debt costs, a stabilising accommodation supply, and improving tourism demand,” Ms Wales said.
“We expect continued growth and resilience in the sector, supported by strong demand and strategic investment.”
