Hotel property returns 17 per cent

Income and capital growth of hotels in the Property Council of Australia (PCA) and Investment Property Databank (IPD) hotel index has returned 17 per cent for the 12 months to September.

The index contains data from 14 owners including AMP Capital Investors, Colonial First State GAM and Eureka Funds Management. It represents 99 assets worth around $5 billon and is compiled using five and four star hotels in CBD locations serving the corporate market and excludes non-CBD locations and resort hotels.

According to Anthony De Francesco, managing director IPD Australia and New Zealand, the survey represents around 65 per cent of the five and four star market across Australia with index weights by state of 52 per cent NSW, 23 per cent Victoria, 14 per cent Queensland, 6 per cent WA and 4 per cent other.

The index details both income and capital growth for hotels on a quarterly basis and the total return of 17 per cent for the year ending September 2011 represents an increase of 6.1 percentage points over the previous year's result of 10.8 per cent. Of the 17 per cent 7.5 per cent is attributable to capital growth and 9.5 per cent to income.

Five star hotels returned 19.1 per cent compared to 14.3 per cent for four star hotels.

According to the report the high demand for CBD hotels with around 80 per cent occupancy rates reflects strong business from corporate travellers and an undersupply of quality hotels rooms in major CBD markets.