26 Jul Sydney’s West End Hotel set to be transformed from a backpackers into an ibis Budget hotel
The historic West End Hotel in the Sydney CBD is set to be transformed into a 95-room ibis Budget hotel in early 2020, its owners say.
With fresh plans lodged to the City of Sydney in mid-July, the property at 412 Pitt Street is going through a major refurbishment before it opens its doors as the AccorHotels-operated ibis Budget Sydney Central.
The refurbishment involves internal alterations including the removal of the common kitchen, lounge, common amenities and dormitory rooms on each level. This will make way for contemporary hotel accommodation in the form of single and double hotel rooms, as well as a breakfast room on level one.
Built in 1929, the West End Hotel contained 100 suites, according to the building’s distinct yellow side wall, and was Australia’s tallest hotel for 34 years. It is currently operating as a backpackers’ hostel with 359 beds across 86 rooms.
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Donohue Tourism Holdings paid $18.6 million for the 14-level building in 2015 – equivalent to about $80,000 a square metre in land value for the 232-square-metre site.
The company is owned by Christopher Donohue, who also leads Reward Group, the hotel refurbishment company appointed to upgrade the West End Hotel.
“It was evident several years ago that that area of the CBD had potential for growth and would upscale in years to come,” he told Commercial Real Estate.
“Noticing the escalating demand for high-quality, affordable hotel rooms in the Sydney CBD with close proximity to Central Station and Sydney’s Chinatown, we see great potential in the anticipated transition of the existing West End Hotel at 412 Pitt Street, Haymarket, to opening as ibis Budget Sydney Central.”
Mr Donohue said that other brands, such as InterContinental Hotels Group’s voco, which is slated to open at 430 Pitt Street by 2020, have also seen potential in this area.
“As properties like the ibis Budget Sydney Central and voco Sydney Central open, we will see the amenities in the area also revitalise and upscale,” he said.
“The positioning is great, the ibis Budget Sydney Central is so close to Central Station – from there, visitors can explore greater Sydney with ease.”
Next door, another budget hostel at 410 Pitt Street was sold for about $20 million in 2018 and has initial approval to be turned into a skinny high-rise hotel.
The height limitation for the future building on the site is about 31 storeys.
While this pocket of the city is known for its concentration of budget accommodation, the plans for the Pitt Street sites are indicative of the southern CBD’s transition into more upscale hotels.
CBRE Hotels director Andrew Jackson, who sold the West End Hotel in 2015, said future transport infrastructure and Chinese tourists are contributing to the changing face of that area.
“We expect the southern part of the CBD to benefit from improved connectivity through the Sydney Metro and Sydney light rail – significant transport upgrades which will positively transform the immediate vicinity and help drive interest in a variety of development opportunities,” he said.
“Chinese tourism arrivals to Australia are continuing to grow exponentially and this will help drive future interest in markets such as Sydney’s Chinatown precinct.”
Mr Jackson pointed out that the uptick in the Sydney CBD’s new hotel supply has prompted hotel groups and developers to focus particularly on sites with strong underlying fundamentals as visitor arrivals grow.
“The Sydney market has been feeling some pressure from increased supply, however, hotel nights occupied by domestic travellers increased by 18 per cent in the year ending March 2019,” he said.
“Over the same period, there was a 7 per cent increase in nights spent in Sydney hotels to over 20 million annually.”
Despite a recent surge in supply, Mr Jackson said there was still a distinct lack of accommodation investment opportunities in the Sydney CBD, which “has been the key driver of property price growth”.
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