Larry Schlesinger:

Hotel investors will be rewarded with “decent returns” over the medium to long term, as the hotel sector recovers from the harsh effects of COVID-19, according to Sabine Schaffer, head of international asset management at Pro-invest Group.

Having raised $300 million for its second Australian Hospitality Opportunity Fund, including an equity investment from the Australian government’s Ocean Energy Finance Corporation, Ms Schaffer said the pandemic had created a “temporary bump in the road” for hotels compared to the “accelerated structural shift” in retail as seen in the rise of online shopping.

“COVID was a significant bump on the road with very negative consequences for many hotel operators,” Dr Schaffer said. “But I believe people will want to travel. It’s not natural to stay in your two-bedroom apartment and be locked up.

“Look at somewhere like China, where the average hotel occupancy rate is now back in excess of 55 per cent and domestic airline traffic is back at 90per cent”

The second hospitality fund will drive the expansion of Pro-invest’s portfolio of Holiday Inn Express hotels in Australia and New Zealand, which it has been developing under an agreement with Intercontinental Hotels Group since 2013.

The group will also expand into the upper-mid-scale segment with the development of a series of voco hotels, also under an agreement with IHG, with the capacity to also acquire distressed hotels and reposition them.

Pro-invest has already secured four strategic sites, which will see the development of close to 1000 rooms in Auckland, Sydney and the Sunshine Coast

Ms Schaffer said Pro-invest’s focus on developing select service Holiday Inn Express hotels in locations “carefully chosen for their demand drivers” would ensure they rebounded more quickly than full-service five-star hotels, where breakeven points are much higher.

“Over the medium to long term we expect to show some decent returns for investors,” Ms Schaffer said.
Like other hotel operators, Pro-invest was hit hard by the pandemic with occupancy “falling off a cliff” from rates of 75-80 per cent recorded in January and February.

The group also had to temporarily close a number of hotels, while its $300 million raising was delayed by about nine months.

‘We are starting to see things improve. Our Newcastle Holiday Inn Express was seeing occupancy at
55 per cent while at our other hotels it’s around 3o-40 per cent,” Ms Schaffer said.

Original Article 2020-10-28
Credit: AFR Investors promised ‘decent’ returns after CEFC backs $300m hotel fund