Sydney hotel magnate Jerry Schwartz says he will look to acquire more properties, telling a major hotel conference he needs to "spend money" to reduce his tax bill.
Mr Schwartz, who oversees the country's biggest privately owned hotel portfolio including the soon-to-open five-star Sofitel Darling Harbour and numerous Accor-managed Sydney hotels, has enjoyed bumper profits amid the current hotel boom, meaning a bigger slice of his income must go to the tax man.
"My wife keeps telling me 'that's enough, that enough" but my brain says its not enough," he said.
"Also, I have to keep going, because as I make more profit, I have to pay more tax. And I don't like paying tax. So the only way to pay less tax is to spend more money."
Mr Schwartz was speaking at the Melbourne AHICE conference where one of the key themes to emerge was that of a slowdown in hotel deals in the first quarter of the year due, in part, to a lack of investment opportunities.
A report by CBRE Hotels said there were less than $300 million worth of hotels transacted in the March quarter, 50 per cent less than corresponding periods over the two previous years.
Mr Schwartz said he had also given thought to the current seven-year hotel cycle and reckoned there were about three years to go before it bottomed out.
He said he questioned whether it was better to save up his money and wait for the cycle to end "when theoretically" there should better buying opportunities. "But then I thought to myself,' there will be nothing left if I wait'."
Speaking on the same panel alongside Mr Schwartz, Kumar Kalyanakumar from Eureka Funds Management said cities like Brisbane and Perth, which are facing an oversupply of hotel rooms, were already in decline with their property clocks well past midnight. "The bigger cities like Melbourne and Sydney are better insulated," he said.
Change and adapt
Also speaking on Wednesday, AccorHotels Asia-Pacific chairman Michael Issenberg focused on the need for hotels to constantly change and adapt. He said he was surprised that other hotel companies were not taking the threat from short-term letting platform Airbnb – "the fastest-growing business in the hospitality sector" – as seriously as Accor was.
"There is no doubt that Airbnb is eating into demand," Mr Issenberg said.
"What we have found is that where it really hurts is on constrained days, when we typically would really drive up the average daily room rate, now Airbnb is really taking the cream off the top of it."
But Mr Issenberg also said there was a huge opportunity for companies like Accor in the holiday rental market, describing Airbnb as a "thin digital layer over under-utilised assets".
"I don't believe the private rental market will destroy hotels at all. In fact it's a growth opportunity.
"If you look at all the apartments being built in Sydney and Melbourne, if the residential demand is not there, it's going to be filled by [short stay] private rental.
"We see that as an opportunity and want to be in that space and have made a number of acquisitions including [private rental businesses] like Onefinestay, Travel Keys, Square Break and Oasis.
"We want to put in a bit more of the serviced element, and make use of our loyalty and drive an experience that makes private rental more successful."
TFE Hotels CEO Rachel Argaman also said there were opportunities for hotel companies from the rise of Airbnb, including being able to offer their properties on the digital platform at low "3 per cent commission rates".
