Action Hotels acquisition of Ibis Budget Hotel at Melbourne Airport

Posted: 1st July 2015 08:21

Action Hotels, the leading owner, developer and asset manager of branded three and four-star hotels in the Middle East and Australia, is pleased to announce that it has agreed to acquire the business and assets of the 73 room ibis Budget hotel at Melbourne Airport, Australia, for $8.8m (the "Acquisition").

The Acquisition will be the seventh ibis branded hotel in the Group's operating portfolio, and the second ibis hotel the Group owns and operates in Melbourne, Australia.  During the year ended 31 December 2014 the hotel averaged 89.8% occupancy and contributed EBITDA of US$1m. The Acquisition will be immediately earnings enhancing for the year ending 31 December 2015 and thereafter.  The Acquisition also brings with it the opportunity to develop or further extend the existing hotel on the acquired land in the future.

The newly renovated hotel and its accompanying 3,697m2 of land is located in a prime position within the Melbourne Airport precinct, 300 metres from the terminal buildings.  Melbourne is a cultural and business hub in Australia and is recognised as a well-established tourist and business destination.  The hotel market in Melbourne has performed strongly in the last decade. Melbourne airport has a 20 year expansion program in place, investing some AUS10bn to boost its capacity and absorb the ongoing growth in passengers, with a new 20,000m2 terminal due to open in 2015 which will host regional airlines Jetstar, Tigerair, and Regional Express (source: Melbourne Airport Management).

The $8.8m cash consideration will be funded US$3.7m from existing cash resources available within the Group and the remainder through debt secured on the hotel property provided by St Georges Bank, the current lender on the property, at a fixed rate of 4.99% per annum for five years to 2020. The hotel is built on land owned by Melbourne Airport Authority and is leased until June 2047.  The ground rent is indexed annually with the next rent review due in 2022. Action Hotels will continue to operate the hotel under the ibis budget brand for a period of 20 years, with an option to extend.  Completion of the Acquisition is expected to occur within 90 days of this announcement.

The addition of ibis Melbourne Airport brings Action Hotels' operating hotels to nine and 1,561 rooms.  In addition, Action Hotels has a fully funded development pipeline of nine hotels and a further 1,512 rooms, taking the total operating and committed pipeline hotels to 3,327 rooms, a 60% increase from December 2013.

Sheikh Mubarak Al Sabah, founder and Chairman of Action Hotels stated,
"We have secured this strongly performing hotel asset in an attractive market at an attractive price and the operational performance of this hotel will immediately contribute to our Group profitability.  The acquisition will further benefit from the ability to leverage our increased scale of operations in Australia whilst providing strategic optionality in the region.

"I am pleased to add an operational hotel direct into the portfolio where we will see immediate contribution to our profitability.  I am also delighted to be partnering once again with Accor demonstrating the strength or our relationship with the leading global hotel operator."

Commenting on the new development Simon McGrath, Accor Middle East Chief Operating Officer said,
"We are delighted to be partnering with Action Hotels on the ibis Budget Melbourne Airport.  Our excellent relationship with Action Hotels within Australia and the Middle East continues to grow and we are excited about the up and coming 368 room ibis Elizabeth Street Brisbane, which will be the largest ibis branded hotel in Australia.  This will take the number of hotels that we manage on behalf of Action Hotels in Australia to three with 596 rooms."


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