Tropical Queenslander motel in Cairns attracting wide range of buyers

A motel in the heart of Cairns that services both tourists and hospital patients is on the market and gaining interest from a broad range of Australian buyers.

Tropical Queenslander is a classic Australian motel: 58 rooms, each with kitchenettes and sliding doors set around two swimming pools.

The palm tree-studded 3708sqm site has three street frontages and is nestled on a strip of land between Captain Cook Highway and the Esplanade, which features shaded paths and parklands plus the iconic Cairns Lagoon.

The freehold motel is forecast to generate $749,000 EBITDA for 2021-22. It’s being sold through JLL Hotels & Hospitality Group with a guide price of over $7 million and expressions of interest closing on 12 April. 

Owner-operated in recent years, the vendors are now seeking cooler climates in Brisbane. 

The motel welcomes lots of hospital patients and guests given its close proximity to Cairns Hospital. Picture: realcommercial.com.au/for-sale

Agent Gareth Closter, senior vice president of investment sales at JLL, said Tropical Queenslander’s biggest attraction — strong cash flow — isn’t all down to tourism.

Patients at Cairns Hospital, a 10-minute stroll away, account for 40% of the hotel’s income. Twenty of the rooms are even reserved for patients on Queensland’s Patient Travel Subsidy Scheme.

This base income has allowed the hotel to trade well despite Queensland’s COVID-related border closures. Last year revenue only dipped to $670,000, with occupancy steady at around 70%.

By comparison, the occupancy rate for Tropical North Queensland as a whole was 50.7% for 2020-21, according to the Australian Accommodation Monitor Summary performance report, conducted by global hospitality data analytics firm Smith Travel Research.

The Australian hotel sector is continuing its recovery after being hit hard by the pandemic. Picture: realcommercial.com.au/for-sale

PropTrack economist Anne Flaherty said the Tropical Queenslander’s security of income “really sets it apart”.

“Even now, travelling hasn’t returned to what it was, so if you have a tourism asset that is actually generating a good cash flow, that’s going to make it even more appealing to a broader range of investors, including some who are perhaps a little more risk averse,” she said.

“Plus its location is amazing — close to the airport, close to the water, close to the hospital in the heart of Cairns. It has a lot going for it.”

Mid-size hotels attract diverse buyers

In its first week on the market, Tropical Queenslander has already received more than 30 enquiries, Mr Closter said. Interested parties range from first-time occupiers and private investors to large institutional players. The majority (around 90%) are based in Australia.

Investor demand for hotels has already rebounded following a tough 2020, Colliers data shows. In fact, 2021 was the second busiest transaction year on record, with $2.8 billion worth of hotels sold across Australia in 60 deals.

Regional transactions accounted for around $0.5 billion, signalling one of the busiest years to date in regional hotel markets, which continue to be fuelled by domestic tourists still cautious about travelling overseas.

National director of Asia Pacific hotels transaction services at Colliers, Karen Wales, said most investors have looked beyond the crisis.

“They’re basing their pricing on future stabilisation. Most investors know that tourism will rebound strongly, probably with a stronger domestic market than we had pre-COVID.”

With borders opening, we can expect to see greater levels of overseas investment, she said, while Ms Flaherty anticipates larger numbers of institutional players competing for hotel assets.

Institutional investors were largely absent from the mid-priced hotel market [$5m to $15m] in 2020, but in 2021 they accounted for 15% of buyers, while private investors accounted for 85%, according to Real Capital Analytics data.

“This shows institutional investors are becoming more active,” Ms Flaherty said.

Potential for developers to reposition

Tropical Queenslander is in need of refreshment, which could also pique the interest of developers, Mr Closter said.

“Cairns is a market that’s screaming for people to come in and reposition buildings.

“But the motel’s bones are strong,” he added. “Having been in Cairns for 30 years, it would have survived some cyclones.”

Tropical Queenslander is ripe for repositioning, which would help to boost room prices.
Picture: realcommercial.com.au/for-sale

Ms Wales said the domestic hotel market is seeing a number of value-add investors seeking opportunities to improve or enhance to further drive income through the recovery. 

“Hotels that have a twist from a repositioning or enhancement strategy, that’s definitely preferred to new developments at the moment,” she said.

‘Pretty compelling’ for novices too

The motel would also suit novices with no hotel experience, Mr Closter said, though it’s unlikely to attract tree or sea changers, who tend to go for cheaper properties in more idyllic locations.

The current owner, originally from China, bought the property in 2016 and has run it themselves for the last three years.

“A lot of people running hotels aren’t hoteliers, they’re multi-taskers, they’re good with people and they can deal with things on their feet,” he added.

With 58 keys, Tropical Queenslander is big enough to generate a good income but the workload is still manageable, he added.

Plus hospital guests tend not to be late-night check-ins or check-outs and usually stay a while.

“If you’re happy to take on that risk it can lead to some fruitful returns,” Mr Closter said. “It’s a pretty compelling investment case.”