Apartments of Melbourne calls in liquidators as creditors owed $1m

Over 50 jobs lost as operator of 160 luxury serviced apartments across Melbourne’s CBD puts business into liquidation.

Apartments of Melbourne director Neil Devonport. Picture: Luis Enrique Ascui

An operator of 160 luxury serviced apartments across Melbourne’s CBD has been placed into liquidation after being slammed by the collapse of business travel as well as a flood of accommodation hitting the market on online booking site Airbnb.

Apartments of Melbourne, which specialised in short stay accommodation and employed 52 people, will now be liquidated by Cor Cordis partner Sam Kaso.

The business which turned over more than $10m annually counted up-market properties scattered around the city in three buildings, at Empire Melbourne Central, 555 Flinders Street, and 568 Collins Street.

Inside shot of Empire Central in Melbourne

The serviced apartments sector has been battered over the past year as bushfires hit the industry in its 2019 peak, before COVID-19 dealt the final blow.

Quest set the precedent after several of its franchises were shuttered by the pandemic.

Now three corporate entities under the business Apartments of Melbourne have been rolled up, owing creditors around $1m, according to director Neil Devonport.

Mr Devonport said much of the money was owed to the ATO and bigger creditors like Booking.com.

Apartments of Melbourne started in 2015, before growing to 160 apartments across three buildings.

Prior to the bushfires in 2019, it was growing and looking to sell but then between March and June this year 80 per cent of bookings at Apartments of Melbourne were cancelled as Victoria languished under its first wave of restrictions.

From July to September, as Victoria slipped into its second wave arising from the catastrophically botched hotel quarantine arrangements, Apartments of Melbourne saw all bookings cancelled.

Mr Devonport said only six of his staff were entitled to JobKeeper.

Neil Devonport, who ran a short stay apartment company in Melbourne that had 160 apartments across three buildings. Picture: Luis Enrique Ascui

Unlike some operators of short stay apartments, Apartments of Melbourne did not receive any contracts to supply accommodation to Victoria’s quarantine or medihotel schemes.

Mr Devonport said the combination of businesses moving many of its meetings to Zoom or online combined with closed borders meant conditions in the industry were unlikely to turn around any time soon.

Despite the recent success of the listing of Airbnb on the US stock exchange, the short-stay market has been hammered by the pandemic.

CEM group, which operates Quest hotels in Sydney, Melbourne, Adelaide and Gladstone has closed five hotels, while thousands of Airbnb’s have flooded the rental market, leading to a collapse in rents.

Mr Devonport said almost 25,000 rentals had come on to the Melbourne market in the last six months, of which over half were short-stay apartments where operators had simply walked away.

“A lot of our staff were on student visas. I had to tell staff they need to go home because the government won’t support them,” he said.

Apartments of Melbourne ran 160 apartments across the city including some at the Empire Melbourne Central.

Mr Devonport said government support for the sector was nowhere to be seen, with Victoria’s touted tourism voucher program excluding metro businesses.

“There has been no program for Melbourne Metro. Melbourne metro properties, those that have reopened have seen occupancy of 25-50 per cent and are struggling,” he said.

Now, after the emotional toll of seeing his business collapse, Mr Devonport is done with the short stay apartment industry.

“I’ve taken some time off due to mental health issues, couldn’t process what was going on. It was such a cataclysmic event,” Mr Devonport said.

The collapse of the business comes as a wave of insolvencies loom across the Australian economy.

Temporary debt protections brought in by the federal government during the early days of the pandemic have suppressed insolvencies.

ASIC data shows only 6278 businesses went bust between October 2019 and October 2020.

Of these almost two thirds were in the first half of the year, as rates of insolvency plummeted.

But the looming end of protections has many forecasting a reckoning for businesses which have traded through the pandemic, supported by government payments and debt relief.