Marriott signs up Westin for Adelaide skyscraper amid Australian expansion

A huge international business group will open a swanky new 17-level hotel in Adelaide’s first skyscraper as part of a plan to add 20 new hotels to its Australian portfolio.

Artist's impression of the Keystone tower proposal in Adelaide.

Marriott International will open a Westin hotel in Adelaide’s first skyscraper as part of an expansion plan to add 20 new hotels to its Australian portfolio over the next five years.

The hotel chain has reached an agreement with the developers behind the $400m Keystone tower – proposed for the historic Freemasons Hall site on North Tce – to operate a 236-room hotel across 17 levels of the 37-storey, 183m tower.

Marriott had initially planned to launch its Westin brand in Adelaide at Greaton’s $200m hotel development at the city’s GPO site, but that project, which is due to open next year, was later rebranded to the flagship Marriott brand.

A Courtyard by Marriott is due to open in Perth in February – the first in a pipeline of 20 new hotels the chain is targeting over the next five years.

Marriott vice president of hotel development for Australia, New Zealand and Pacific, Richard Crawford, said regional areas would be a focus.

“We have been busy opening a 600-room W Hotel (in Sydney) but that’s going to dry up. Those big CBD hotels are going to become rarer and rarer, and so I think the fertile expansion territory for us will be regional areas, under franchises, with mid-tier brands,” he said.

“We’re very heavy in the luxury and the premium space, so we’re focusing on mid-scale and franchising, as well as conversion opportunities where there are perhaps some hotels under duress that might have a brand that doesn’t have the power of Marriott International.

“We’ve been heavily focused on capital cities and we’re looking at tier two cities. For example in NSW that might mean Wollongong or Newcastle, in South Australia we want to be in the Barossa. If you take Victoria, Geelong is a tier-two city.”

Artist's impression of Keystone tower on North Tce in Adelaide. Picture: Supplied by Marriott International

Mr Crawford said while franchising was Marriott’s primary business model globally, it was less common in Australia, where just three of the company’s 32 hotels were run under a franchise model.

“We’re targeting hotel owners who operate the hotels themselves, but might not have a brand – they might be an independent hotel, and they see the value in entering into a franchise agreement,” he said.

“The hotel industry really is a distribution challenge and with our loyalty members, with our website – marriott.com is now the seventh largest e-commerce site in the world – as an independent hotelier if you can tap into that, then you still run the business yourself but you end up with a different brand and that future proofs your business.

“I think Covid exposed the business mix of some independent operators, and they’re looking to have a little bit more certainty around their future.”

Marriott-run hotels in Australia include the Ritz-Carlton, Westin, Sheraton and Marriott brands, as well as the world’s largest W Hotel in Sydney, which opened in October with 588 rooms overlooking Darling Harbour.

In Adelaide, plans for the Keystone tower have been submitted for approval by developers – the Freemasons SA/NT chapter and Victorian developer Pelligra – and include the hotel, as well as office space, a function area, wellness centre, rooftop restaurant and observatory.

The History Trust of South Australia is also hoping to house a new Adelaide Museum of South Australia’s History on the first five floors of the tower, which is expected to be completed by late 2026.

Marriott International vice president of hotel development for Australia, New Zealand and Pacific Richard Crawford. Picture: Supplied by Marriott International

It would become Adelaide’s first skyscraper, which is generally defined as a building over 150m tall.

Mr Crawford said Adelaide had emerged as a destination with strong fundamentals and a need for additional hotel supply given its lack of premium accommodation.

“There’s a lot about Adelaide, but also greater Adelaide, and also the tourism and events space – things like Adelaide Oval and festivals – they’ve all contributed to greater interest from investors,” he said.

“It was a case not that long ago where institutional hotel investors were only interested in Melbourne and Sydney. They’re now looking at Adelaide.

“Adelaide has this really sound mix of business now – leisure, corporate and events – which has got the attention of investors, in many cases, for the first time.”

Marriott said occupancy across its Australian portfolio has recovered to 96 per cent of its pre-Covid levels, but new developments remained a challenge following the surge in interest rates an construction costs that developers had faced in recent years.

“The good news is if you’re open today, you’re trading really well: travel is back, business is good,” Mr Crawford said.

“The headwinds, though, to get from a greenfield site to an open building are really the challenge. We put the brakes on development, but I think that was a good natural correction that we probably needed, because we didn’t want thousands of hotel rooms opening at the same time.

“I think that there will be a correction. We know where interest rates are going now – they’re not going much further north, they’re certainly going to be going south at some point next year.

“Construction costs – that is a paradigm that I think people are waiting to see what will happen. I think that will find its level next year. Some projects will disappear but I think when that correction occurs, people will pick up tools and we’ll get these projects underway.”