Hotel Development—The Peloton is Now Active

Investment is returning to the commercial accommodation sector with NSW, QLD and WA showing the most activity as growth follows demand. The Peloton has got the message and we are seeing developers and investors joining the chase for appropriate sites and locations. As always, location is an essential ingredient in successful project development and especially in the hospitality sector. Over the past decade development activity has been minimal, however with demand now exceeding supply across most of the nation’s CBD’s and prime regional areas the next generation development cycle is commencing.

Yields in the hospitality sector of the property market are strong and in fact on the rise, with existing stock trading at high multiples giving a positive sign to new builds being committed. Yields combined with improved conditions in the economy are creating activity in a new hotel development cycle. Developers and Investors entering this new development cycle, now need to embrace a totally different formula of operations from the very embryonic stage. “Build it and they will come” needs to be modified to “Build what, why and where” in order to establish a predetermined viability for the concept.

The Feasibility Report is now essential at concept development stage. Essential Service Hotels is a specialist in establishing the development formula from concept through to completion and is witnessing first hand that activity is gaining momentum in this next hotel development cycle. The criteria for new builds and re- fits is based on project viability and consequent ability on completion to optimise trading ROI whilst meeting consumer service and facility expectations.

A vital element in concept development is analysing brand and operator relevance, critical mass, site utilisation and construction dynamics. To see a Developer with an approved DA and an Operator’s Management Agreement in place then wanting to optimise Investor returns, indicates a project in difficulty from the start. There are many variables and complexities in hotel development that were not obvious in the previous development cycle of the 90’s and in isolation my not seem “deal breakers” however times have changed and the major issue at concept stage is now, viability! As a specialist in the hospitality sector, Essential Service Hotels understands the process and the procedures necessary to deliver a viable hotel development.