After making the Lion City’s largest purchase of a single hotel earlier this week, Singapore’s Worldwide Hotels Group has followed up with an A$170 million ($112.8 million) buy of a high-rise hotel in downtown Melbourne from one of its compatriots.

Worldwide is in the process of acquiring the 472-key Novotel and ibis Melbourne Central Hotel from Well Smart Investment Holdings, according to an announcement by CBRE on Thursday, with the property consultancy having brokered the off-market deal on behalf of the family-owned Singaporean vendor against a backdrop of a rebound in travel Down Under.

“The Melbourne transaction followed a strong recovery in the city’s hotel market, with Melbourne recording the country’s third highest RevPAR growth rate in the year to April 2023, growing by 54% compared to the same period through 2022,” said Wayne Bunz, a national director with CBRE Hotels.

The acquisition gives Worldwide its third location in Australia, with the former “love hotel” operator having now committed around $500 million to hospitality property investments this week, after Pan Pacific Hotels said on Tuesday that a unit of Worldwide has agreed to buy its Parkroyal on Kitchener Road hotel in Singapore’s Little India neighbourhood for S$525 million ($389 million).

Worldwide Impact

Worldwide is buying the hotel complex through its subsidiary Legend Land Melbourne for about A$360,170 for each the 35-storey property’s units, which include 259 rooms in the lower floors operated under Accor’s Ibis economy brand and another 213 rooms in the upper levels operated under the midscale Novotel marque.

The firm controlled by billionaire Choo Chong Ngen is planning to keep Accor as the operator of the venues, with the company having purchased an Ibis Styles hotel in Brisbane and the Holiday Inn Perth within the past five years.

The hotel at 399 Little Lonsdale Street in central Melbourne was sold at a 5.6 percent discount to Well Smart’s asking price of A$180 million when it first put the property on the market in March 2022.

According to CBRE, the Novotel and Ibis Melbourne Central Hotel averaged about 71 percent occupancy and nightly room rates of A$157 over the past 12 months. Built in 2018, the hotel complex is within a short walking distance of the shopping precinct dominated by the Melbourne Central and Emporium shopping centres, and.includes two restaurants, a bar, conference and meeting spaces as well as recreational facilities.

The transaction, set to close in September, will mark the largest single-asset hotel transaction in Melbourne in more than six years, according to CBRE, with Bunz pointing to Melbourne’s ongoing growth as supporting the Victorian capital’s hospitality sector.

“We have strong confidence in the Melbourne hotel market and its rapid recovery, given it is Australia’s most populated city and the nation’s events capital,” Bunz said. “The market benefits from robust corporate visitation and tourist demand and boasts the country’s best cultural and sports events calendar.”

Worldwide did not issue a statement on the transaction while CBRE declined to disclose funding details.

Foreign Investors Return

Well Smart has become a major investor in Australian hospitality and resort properties over the last decade and a half, and had begun marketing the hotel complex early last year.

In the initial marketing for the property, Well Smart said it was planning to use the sale proceeds to fund its Funnel Bay hotel and residential development in the coastal town of Airlie Beach and other planned projects at Queenstown in New Zealand.

Controlled by a Singapore-based family surnamed Jia, Well Smart gained notoriety in April when it purchased the 136-hectare Lindeman Island in Queensland for A$10 million, with the company officially headed by thirty-something Jia Ruize planning to develop a resort on the island.

In 2015, when Jia was 23, Well Smart won approval to develop a complex encompassing 447 hotel rooms and 120 apartments at 399 Little Lonsdale Street in Melbourne, according to an account in the Australian Financial Review.

The company also owns the Mantra Club Croc at Airlie Beach in Queensland’s Far North as well as a development site near Sydney’s airport, according to The Australian.

Market Recalibrating

Purchases of Aussie hotels are supported by a recovery in tourism and business travel as well as a brighter overall economic brighter outlook, according to Mark Durran, Savills’ managing director for hotel capital markets in Australasia.

Durran predicts that occupancy rates across the hotel in Melbourne’s CBD will average 76 percent for the full-year 2023 at room rate of A$250 per night – levels that could outperform pre-COVID rates of A$220 in 2019.

Occupancy levels have been slowly recovering to reach approximately 70 percent in the year to date, while full recovery can be expected next year, according to Savills.

“Despite Melbourne having the most new hotels opening, it has actually demonstrated how resilient it is (to absorb the new supply). This year has been a transitory year and by the time we get to the end of the year, most of the major segments (corporate and large-scale conventions) are expected to have bounced back in terms of demand,” Durran said in an interview on Friday.