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MICHAEL MORET-LALLI - DIRECTOR of ACQUISTIONS

Michael Moret-LalliWelcome to ADVANCE, Mantra Group’s quarterly communique to the hotel investment community. In this edition, we reflect on the hotel investment market, reveal our latest hotel openings, and hear from our CEO, Bob East, ahead of the release of Mantra Group’s end of year results.

With weighted average cap rates for Australian hotels currently reported at 7.7%, the Australian hotel market is forecasted to deliver strong investor returns over the medium term, driven by inbound tourism growth and limited new hotel supply.

Over the next five years, the accommodation market is expected to continue to benefit from net demand growth, with international visitor room nights expected to grow by 5.5% (CAGR), business travel by 2.3%, and domestic leisure travel growth of 1.4%.

On the supply side, growth in hotel room stock has been historically weak, with a net underinvestment in the Australian hotel industry across the last decade, in part due to lack of funding capacity. Today, however, hotel development pipeline activity is far stronger across all Australian capital city markets, with forecasted national supply growth of 2% (CAGR) over the next five years.

These market dynamics are anticipated to combine to deliver strong medium term growth in revenue per available room (RevPAR) in Australia’s key markets, continuing the trend of 5.2% RevPAR growth experienced across Australia to March 2015.

Driven by this industry performance, in the same period (to March 2015), there were 69 large-scale hotel transactions recorded in Australia, representing circa $3 billion in sales and a 47% increase on the previous year. This record investment is rapidly, and positively, changing the landscape of our industry as we welcome a new wave of investors and see the return of others who, for a time, sought returns elsewhere.

To all, may the financial year ahead be a prosperous one.