Geelong’s Mercure Hotel jumps regional hotel rush

The four-star Mercure Hotel in Geelong has been put up for sale, as Kildair Hotels Group moves to cash in on a simmering hotel market.

The hotel, at the heart of the regional city, has been a Geelong staple for 45 years and comprises 138 guest rooms and sits on a 5991sqm site, with a restaurant and bar, meeting and function rooms, an outdoor pool and spa, gymnasium and 24-hour reception.

The hotel is being sold via an expressions of interest campaign, to be steered by CBRE’s Rob Cross and Scott Callow, with the sale coming amid an expected rush on regional hotel assets as city opportunities dry up.

Cross says owner operators are expected to be among the key contenders to secure the asset, with Accor Hotels’ existing management agreement for the hotel expiring next year.

“The ability to achieve vacant possession will be particularly appealing to owner operators, many of whom are looking to expand their networks given the continued improvements forecast for the Australian hotel sector,” Cross says.

The Mercure has scope for future development.

Callow says Geelong is increasingly a destination for government departments, which form a large part of the Mercure’s clientele.

“The popularity of Geelong for government and corporate activity is matched by a year-round sports and events calendar, which has helped to underpin the Mercure Hotel’s strong trading performance,” he says.

The sale comes after a CBRE report into the hotel industry found a spike in investor interest in Australian hotels in 2015 had continued into the first three months of 2016. Almost $500 million worth of hotels traded across Australia throughout the quarter.

Bunz says the growing interest and the tight city markets will push investors out into regional areas such as Geelong.

Geelong’s Mercure Hotel has a number of function rooms and spaces.

“In our 2015 Investors Intentions Survey, just 1% of investors indicated they would be purchasing hotel assets that year. Fast forward 12 months and that interest has jumped to 14%, with hotels now ranking as the third most sought-after asset class behind office and logistics,” Bunz says.

“One of the ongoing constraints will be the lack of purchasable stock and, with high levels of competition pushing up already high prices in Sydney and Melbourne, investors are expected to increasingly focus on opportunities in regional areas.”

The Mercure Hotel’s landholding is also being touted as a future development site.