By Triana O'Keefe, Editor – Australian Hotelier

Introduced earlier this year, the 1:30am venue lockouts and 3:00am last drinks in Sydney’s Kings Cross were a bid to cut down on late-night alcohol-fuelled violence. However, questions have now been raised in regards to the value of hotels within the notorious party precinct.

The legislation changes have had a carryover effect into Sydney’s nightlife economy as venues have had to streamline operations in order to maintain any level of profitability. As the trading environment shifts greatly and the ability to generate sustainable levels of business diminishes, there is a question of decreasing hotel value in Kings Cross.

Various hotels touched by the lockout situation have come to market lately in both on and off-market campaigns – most recently The Bourbon Hotel (pictured below), owned by C.Inc. Despite this, agents from both Jones Lang and LaSalle and Ray White Hotels told PubSales, Kings Cross hotel values will not be affected.

“The value of the Bourbon & former Swans Club has actually increased since C.Inc acquired the site, as a result of the substantial DA and stage one development improvements that C.Inc achieved, in combination with the spectacular success of other hotel conversion projects in the precinct and the value that has added to the site,” said John Musca, national director of investment sales for JLL.

“There is no doubt, however, that the legislation in the precinct has made completion of the fully integrated large-scale hospitality development vision for the site a marginal proposition, and negatively impacted on trade as it has with all hotels in the precinct,” he added.

“What you often find with hotels especially in CBD or city fringe locations, particularly as many of them were established 80 – 100 years ago, is that they occupy prominent and strategic town centre sites,” Musca said.

“Inevitably, the value of the sites and alternate use schemes outstrip the value of the businesses and hotel uses. Whether it's as a result of legislation or changing demographic trends or consumer habits and preferences which lead to a decline in earnings or not, the outcome is often the same. The Mansions Hotel and Hamptons Hotel in King's Cross were both redeveloped and converted prior to the introduction of the latest lockout legislation 2 to 3 years ago, simply because market forces dictated higher and better uses for the locations and footprints.”

Musca explains that the attractiveness of a site such as the Bourbon is that it has the ability to generate a holding income for developers when compared to a greenfield non-income producing development opportunity.

“This is why accommodation and pub hotels have become increasingly sought after opportunities.”

Andrew Jolliffe of Ray White Hotels notes that whilst the legislative amendments to trading hours and other measures have clearly been corrosive for trade in the Kings Cross area, it should be remembered that the precinct has been an entertainment area for the best part of 100 years, and consequently has and will find a way to evolve in order to maintain its internationally recognised reputation.

“Sure, operators may need to amend the offering they currently provide their targeted customer base, however the proximity to Sydney's CBD and Eastern Suburbs and sheer population density will mean that Kings Cross will survive and again prosper as a key destination point for the city's inhabitants and visitors alike,” he said.


The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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