Salter Brothers, an alternative investment house which has become one of Australia’s most prominent hospitality investors, has long flown the flag for hotel investment in the region. After building its Australian holdings for over a decade, it expanded its investment brief across Asia Pacific 18 months ago, to focus on markets including Japan, Singapore, South Korea and Thailand.
Yet Australia still holds plenty of promise for the firm, according to managing director, Paul Salter. He sees a broad slate of international tourists choosing to holiday in the country in the coming years, including guests from Europe, India, the US, and other parts of Asia. “We will see more international travel arrivals over the next 5–10 years. We are positioning the portfolio for it, we are positioning it for that macro shift,” he says.
The firm’s announcement in May that it will execute a major upgrade of its hotel brands in Australia is part of even greater ambitions. Salter Brothers revealed that it has inked a deal with IHG Hotels & Resorts to rebrand and reposition multiple hotel assets in the country. For example, the InterContinental in Melbourne will become a Regent Hotel by 2030, while the Crowne Plaza Sydney Coogee Beach will be reflagged InterContinental Sydney Coogee Beach, just as the Crowne Plaza Melbourne will upgrade to InterContinental Melbourne.
This priming of its properties is part of a bigger push by the investor to list an AUD$2.5 billion hospitality vehicle in the next 18 months which will include at least six IHG-managed properties. “We have a lot of interest from investors to try and participate in the vehicle,” Salter says.
Green route
Another key hallmark of the firm’s strategy underlines that a sustainable approach is crucial alongside its bid to expand profits. Australia has long been seen as the standard bearer for green real estate in the region, with sustainability benchmark GRESB last year finding that 94 percent of real estate participants in its Oceania survey adopted net zero policies.
Salter Brothers secured a sustainability-linked loan from the Commonwealth Bank of Australia (CBA) in January to support its ongoing expansion plans, which include growing its portfolios of rural, luxury retreats. Under the deal, repayment rates will be tied to Salter Brothers’ performance on key sustainability targets across certain assets within the portfolio, while the firm also pledges to increase the number of properties that hold relevant hospitality sustainability certifications, including EarthCheck and Eco Tourism.
Mei McNamara, ESG manager at Salter Brothers, says that while the firm’s retreats “are already equipped with EV chargers”, the loan “will support the expansion of our renewable energy generation and fund further energy efficiency projects”.
Active asset management
This kind of active asset management is in evidence across Australia’s hospitality sector as it punts on growth. In fact, the three largest properties by deal volume sold last year are all currently subject to major transformation projects this year, with one due to exit the hospitality sector altogether.
The Sir Stamford Hotel at Sydney’s Circular Quay, which was purchased by alternative lender and developer Metrics Capital Partners for AUD$246 million, is to be transformed into luxury apartments by Metrics’ Macquarie Street Developments. Planning permission has been secured for 69 apartments over ten levels.
Other key 2024 deals are seeing new owners repositioning and refreshing hotel assets. The InterContinental Sydney Double Bay, divested for AUD$215 million to an investor syndicate, will be revamped into a luxury hotel that includes top floor apartments with Harbour views, plus ground-floor retail.
Meanwhile, the Esplanade Hotel in Fremantle, which exchanged hands for AUD$116.5 million, a 9.7 percent yield, is to be refurbished by new owner Cosgrave Group. The four-star hotel, which serves both business guests and tourists, will keep on operator Rydges for the next chapter in its story.
Compelling growth
These bids to reposition top hotel assets reflect the ongoing success of Australia’s living sector and acute housing shortages but still bode well for the future of hospitality. Cosgrove director Rob Thomas underlines the “trophy” nature of the Esplanade Hotel deal in the light of expected supply shortages in Perth, adding that significant capex should “position the asset for growth”. And while last year’s hotel transaction market for the entire country was subdued compared to historic averages – some 23 percent below the 10-year, long-term average of AUD$2.18 billion, according to JLL – investor confidence appears to be on the rise.
Colliers reports that first quarter deals for 2025 are already double 2024 figures at AUD$676 million, while macroeconomic fundamentals support a brighter outlook. Research from Global Asset Solutions highlights “lower debt costs, a weaker Australian dollar that is attracting international investors, and the return of Asian investors from markets like the UK, Europe, and Japan” in a new report, remarking that “these investors had previously been inactive or looking for investment opportunities elsewhere”.
JLL, in turn, believes that the country could see hotel transaction volumes totalling AUD$2.2 billion by the end of the year, as long as the expected interest rate cuts materialise and bid-ask spreads reduce. The research firm tips Sydney to remain the leading investment destination, although Melbourne and Brisbane offer “attractive value propositions”.
Many investors are cheered by reports that the country’s international arrivals are close to pre-pandemic figures, thanks to a strong response from travellers hailing from China, India and Southeast Asia. Some 60 new international flight routes have been recently added, reports CBRE, two-thirds of which connect to major East and Southeast Asian airports. Others serve to better link Europe, the US and the Middle East with the country.
CBRE also predicts “complete recovery” for the country’s hotel markets by the end of 2025, backed by the surging international arrivals and consistent domestic demand. CBRE’s Australian head of hotels research, Ally Gibson, says: “With major events, premium hotel openings, and infrastructure projects in the pipeline, the outlook for the Australian hotel sector remains positive.”