A 120-room hotel less than 500m from the site of the New Zealand International Convention Centre has become the first freehold hotel to sell as a going concern in Auckland's CBD in five years.
The majority interests in the 3.5-star Best Western President Hotel, 27-35 Victoria St West, have been sold to New Zealand's largest hotel owner, Pandey Hotel Corporation, for an undisclosed sum.
The deal, brokered by Colliers International's Hotels team, set a record investment yield of under 7 per cent.
Dean Humphries, national director of hotels at Colliers, is pleased to see sales activity in the tightly held Auckland hotel sector.
"This is the first significant hotel sale in the Auckland CBD after a hiatus in transactions over the past five years," he says.
"It's also the first major freehold going concern hotel to sell in Auckland's CBD since the Hilton Auckland in 2012.
"The record investment yield reaffirms the strength of the hotel sector, which is underpinned by New Zealand's ongoing tourism boom."
Humphries says the Best Western President Hotel is located in the heart of the Auckland CBD, close to both SkyCity and the New Zealand International Convention Centre (NZICC).
"The NZICC will be a significant tourism asset providing a significant boost in guest and delegate demand for nearby hotel assets.
"The hotel is also located near the City Rail Link's new Aotea Station, which will offer improved accessibly for hotel guests and staff once completed."
Humphries adds that despite strong demand in the hotel sector over recent years, new hotel development has been slow to pick up.
"Reasons cited include increasing land and construction costs, the recently imposed Auckland Council targeted rate on hotels, delays in consenting, and challenges with accessing funding.
"Furthermore, the lack of suitably qualified companies to build these highly capital-intensive projects is among the biggest roadblocks.
"Fletchers was one of the main companies building hotels throughout the country, but the recent announcement that it would no longer undertake further vertical construction has been another major hurdle."
Despite these challenges, Humphries says a number of new hotels will enter the Auckland market over the next 18 months.
"The recently opened Four Points by Sheraton will soon be complemented by the 130-room So Sofitel opposite Britomart, the 300-room SkyCity Convention Centre Hotel, and the 190-room, 5-star Park Hyatt."
Pandey Hotel Corporation, which is New Zealand's largest hotel owner, has an extensive portfolio of assets including the Pullman in Auckland, and the Sofitel and Novotel hotels in Auckland and Wellington.