First hotel set for Sydney since 2000
Fourteen years after the last major hotel opened in Sydney's centre, 42 developers are competing to turn two 100-year-old government office buildings into accommodations as demand soars.
Elsewhere in the city, developers including China's Greenland Holding Group. and Singapore-based M&L Hospitality plan to add more than 5,300 rooms over the next five years. If they are completed, the city's supply of rooms will rise by about a fifth by the end of the decade, the most since Australia's largest city hosted the Olympics in 2000.
Hotel construction is picking up as the number of visitors to Australia grows at the fastest pace in at least nine years, sending occupancies in Sydney to a record and the highest in Asia after Hong Kong and Tokyo. Sydney's average hotel occupancy is set to reach 88.8 percent by the end of 2016, the highest since at least 2000, according to economics advisory firm Deloitte Access Economics Pty.
"The hotels are all full, so there's more than enough demand for more rooms," said Michael Kum, chairman of Singapore-based M&L, which is adding a third tower at its 683- room Four Points by Sheraton, Australia's biggest hotel, in Sydney. The new developments planned for the city's centre mean "the whole area will be totally transformed," he said.
Sydney ranks 15th on a list of the most expensive markets for hotel rooms. With an average room cost of $221 a night, Sydney lagged behind the priciest market, Geneva, at $308, No. 2 Dubai and New York in tenth place, at $233 for a stay.
M&L in October received government approval to add about 230 rooms to the Starwood Hotels operated hotel in Sydney's Darling Harbour tourist area.
That's part of more than 2,100 rooms which are set to be completed in Sydney's centre by 2019, according to CBRE's analysis of data compiled by researcher Cordell Information Pty.
The last major luxury hotels to open in the city center were the Westin, operated by Starwood, and Minnetonka, Minnesota-based Carlson's Radisson Blu Plaza, both in 2000, broker Jones Lang LaSalle said.
"Sydney has had huge challenges in getting new product into the market in the past," said Oscar Westerlund, Sydney- based director of strategic solutions at CBRE. "Many of the bigger projects are conversions of existing buildings or new releases of land with government at the base of them, and with things like casinos that add to their viability."
The largest hotel development going up in the west of Sydney's center is the 650-room International Convention Centre hotel overlooking Darling Harbour.
It's being built by Lend Lease Group, Australia's biggest developer.
An operator hasn't been named for the hotel as the project is still in the planning stage, said Lend Lease. (Bloomberg)