TPG Hotels checks into Cairns with hotel acquisition

The group has forked out $35m for the property and could install a new operator to capitalise on the gradual return of tourists.

TPG Hotels has acquired the freehold interest in the 207-room Pacific Hotel Cairns for more than $35m.

Despite the lack of mainland Chinese holiday-makers returning to Cairns, Australian hospitality group TPG Hotels has acquired the freehold interest in the 207-room Pacific Hotel Cairns, paying more than $35m.

The hotel hit national headlines at the height of Covid-19 in 2021 when a resident who was forcibly quarantined due to the pandemic set her top floor room on fire, rendering 44 rooms in the hotel inoperable to this day.

However, the eleven-level hotel continues to operate, and it was sold vacant possession by Perth-based Pacific Hotels Group because its closed end fund had reached maturity.

Pacific Hotels Group instructed CBRE to conduct an off-market expression of interest process with the agency’s Wayne Bunz and Hayley Manvell, negotiating the sale.

‘’The sale was negotiated following the vendor’s instructions to approach a list of astute buyers who could work within our timeline,” Mr Bunz said.

Other properties previously within Pacific Hotels portfolio included the Pacific Hotel Brisbane and Coral Cay Mackay.

The four-star Pacific Hotel Cairns is positioned on a 3,570sq m CBD site with the 11-storey hotel offering 207 rooms and suites with a range of guest facilities including an award-winning restaurant, a guest lounge, a swimming pool, and car-parking.

The property also includes four retail tenancies, which are occupied by two long-standing tenants, Destination Cairns Marketing and Flamingos Tiki Bar.

Opened in 1982, the hotel has been refurbished and upgraded and in 2018, 31 new rooms were added and during the 2022 and 2023 financial year the guest rooms and hallways from levels four to nine were renovated. However, 44 rooms are presently unavailable due to a fire in 2021.

Prior to the sale, the hotel was owner-operated under the Pacific Hotel brand, however vacant possession was available upon completion, allowing ultimate future operational flexibility.

“The sale represents an initial yield of 4.3 per cent and a stabilised yield on a three-year basis of 7.25 per cent. This demonstrates the demand for Cairns’ accommodation assets with genuine upside,” Mr Bunz said.

“Infrastructure improvements and a lack of new hotel supply is underpinning investors in Cairns, with the supply constraints expected to support the continued recovery of the city’s limited pool of assets.

“There is the impact of inflation, most people are tightening their belt, that is what happens in winter, that’s when most southerners tighten their belt, and with the Mainland Chinese tourists we are not back at 2019 levels,” said Mr Bunz.

This has already been reflected in increased room rates and revenue, with average daily rates and revenue per available room of 41 per cent and 24 per cent above pre-pandemic levels in 2023.”

The next test of the far north Queensland market will be the marketing campaign for the $100m Pullman Cairns International and the adjoining Village Lane retail and commercial arcade, which are presently being offered for sale via a CBRE Hotels’ expressions of interest campaign.