The US-backed private equity group, Starwood Capital, thinks there’s too many hotels in Melbourne, and if the oversupply continues, it could completely “kill” the market.
Speaking at the recent Hotels Investment World conference in Sydney, per The Australian, Managing Director for Asia, Kevin Colket, said the challenge ahead was the huge volume of hotel supply about to land in Melbourne’s property market.
As The Oz writes, tighter regulations on development properties in Melbourne has driven developers to enter the hotel sector, with this shift in gear seeing a wider pipeline in the number of hotel projects.
Hotel researcher Dean Dransfield told the conference there were 7500 new hotel rooms set to land in Melbourne in the next nine years, per The Australian.
And Colket said with this supply, “it will kill any market”.
“If all that supply gets built (in Melbourne) there will be blood on the streets.”
Colket was also very frank about how the lack of experience of many residential developers getting into the hotel market for the first time terrified him.
“In Melbourne, every residential developer, whether they have done a hotel before or not, all want to build a hotel and that scares the crap out of me,” Colket said, per The Australian.
“We think there will be blood on the streets — we will come in and find the losers. There is too much supply.
“(But) there will be winners and loser projects and we want to find the loser projects and come in and recapitalise.”
Per The Oz, right now there’s more than 5000 rooms under construction or planned, including a W, Shangri-La, and Ritz Carlton hotel for 2018, with another report suggesting the demand for Melbourne was too much and could damage tourism.
On top of this challenge is also the Airbnb and sharing economies disrupting traditional hotel markets.
At the same conference, hotel experts and executives claimed there are cracks appearing in Airbnb’s business model, and it won’t be long before hotels come back to steal customers back.