Luxury hotel investment in Australia outpaces the broader market as demand surges

CBRE research shows luxury hotel demand growing at more than double the wider market since 2019, with median prices per key up 81% and a thin pipeline beyond 2027.

Luxury hotels in Australia and New Zealand are outperforming the wider accommodation sector. CBRE’s Luxury Hotel Market report shows luxury demand has grown at a 2.9% compound annual rate since 2019, more than double the broader market’s 1.3%, while the median price per key has risen 81% and the development pipeline thins after 2027.

Strong demand, expanding rate premiums and a limited development pipeline are driving the gap.

The luxury segment has maintained stable occupancy levels of 78% to 79% despite new supply entering the market.

Since 2020, 20 hotels comprising 3,517 rooms have opened across Australia and New Zealand, with luxury properties representing approximately 33% of all rooms delivered in Australia during this period.

Luxury hotel prices per key up 81%

Transaction prices have surged. The median price per key has increased by 81%, from around $396,000 in 2011–2014 to $718,000 in 2023–2026 year to date. This growth is attracting new global brands and supporting expansion through conversions, repositioning, branded residences and independent operating models.

Price per key is a hotel’s sale price divided by its number of rooms. It is the standard way investors compare hotel values across properties of different sizes.

Since 2021, approximately $3.2 billion in luxury hotel assets have transacted across Australia and New Zealand, with CBRE advising on approximately $1.75 billion, representing 55% of total transaction value.

International capital sets new benchmarks

CBRE’s Head of Hotels, Capital Markets, Pacific, Michael Simpson said international capital has been a crucial driver of investment activity.

“These transactions have established new benchmarks for absolute price, price per key and yield, attracting both domestic and international capital,” Mr Simpson said.

“Outcomes have been achieved across different market conditions, from transactions executed during pandemic lockdowns to major sales completed as investment activity recovered.”

He said that Chinese and Hong Kong investment were particularly active between 2012 and 2018, whilst Singaporean and Malaysian capital has remained steady with a more diversified buyer pool emerging in recent years.

“This depth of offshore interest has supported liquidity and helped establish new pricing benchmarks alongside active domestic capital,” Mr Simpson said.

Offshore buyers have also returned to other parts of the commercial market. Read more on foreign investors surging back into Australian commercial property.

Room rate premiums are widening

CBRE’s Director, Hotel Research, Ally Gibson said luxury hotel performance is supporting the strong pricing outcomes.

“Since 2019, luxury ADR increased across every market analysed and premiums over the all-scales sector are widening considerably,” Ms Gibson said.

“In Australia, the average luxury ADR premium over the all-scales sector increased by 53 per cent, from $62 in 2019 to $94 in 2026.”

ADR, or average daily rate, is the average room revenue a hotel earns per occupied room per night. A widening ADR premium means luxury hotels are lifting their prices faster than the rest of the market while keeping occupancy steady, which flows through to income and, in turn, to valuations.

A thinning development pipeline

Looking ahead, 11 luxury hotels comprising approximately 1,979 rooms are currently under construction, with most delivery expected in 2026 and 2027. However, beyond the current development cycle, the confirmed pipeline thins materially as feasibility constraints limit new projects.

“Strengthening demand and limited new supply should support the performance and value of established luxury assets, particularly in markets with high barriers to entry,” Ms Gibson said.

What this means for commercial property investors

For most private investors, a luxury hotel sits well outside their budget. The trends behind CBRE’s figures still matter for anyone holding or considering commercial property linked to tourism and hospitality, such as smaller hotels, motels, serviced apartments, and retail or hospitality space in visitor destinations.

Hotels are also one of the more specialised asset classes to finance. A hotel is both a property and an operating business, so lenders typically look at:

• the property’s value, location and condition
• trading history, including occupancy, ADR and revenue per available room
• the operator or management agreement and the borrower’s industry experience
• whether the loan is for freehold going concern, freehold only or the business alone

Lending ratios for hotels and accommodation assets are often lower than for standard office, retail or industrial property, and fewer lenders are active in the sector. Our article on lender sentiment toward Australian commercial real estate covers the wider lending picture, and how the commercial property cycle creates opportunities explains where timing fits in.

If you’re weighing up a hospitality or tourism-linked purchase, a broker can compare commercial property loans from lenders that consider accommodation assets. Attain Loans is a mortgage and commercial finance broker in Melbourne’s west working with investors and business owners, subject to each lender’s assessment.

This article is general information only and doesn’t take into account your objectives, financial situation or needs. Consider whether it’s appropriate for you and speak with a licensed professional before making a decision.

Further questions

This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.