They are as Aussie as an Iced VoVo but it seems our classic country pubs are now worth big bickies.
This month’s sale of Wagga Wagga’s iconic Victoria Hotel set a new benchmark with fund management group Harvest Hotels paying a whopping $29 million for the Baylis Street property.
Those in the know say we’re likely to see even bigger numbers in the near future.
The Victoria Hotel holds a commanding position in Wagga’s CBD and is one of the most profitable hotels in regional Australia with revenues of more than $10.5 million per year.
Harvest Hotels director Fraser Haughton says he’s more than happy with the price tag.
“It’s got excellent mixed revenue with food, beverage and gaming and a separate offering up on level one,” he says.
“Strong revenue but diverse, which we like. And then the iconic nature of it in Wagga was attractive.”
Fraser says a love for the trade led him and his business partner Chris Cornforth to start investing in hotels.
“The simple answer is, I’m a publican. Chris and I worked together in pubs in Sydney and we always wanted to go off and get into the game for ourselves,” he explains.
The group also purchased the nearby William Farrer Hotel last year, extending their portfolio to seven hotels across Albury, Tamworth, Dubbo and Wagga.
“In a place like Wagga, you don’t have to look too far to see evidence of government spending on infrastructure projects,” Fraser says.
“All of those things bolster that regional economy. They make sure that a town’s got all the services that it needs and it gives people the confidence to either start businesses or invest in the town and then it all snowballs.”
The Harvest group is not alone in backing the strength of regional economies. A string of NSW pubs has recently changed hands, including Wagga’s Thomas Blamey Tavern.
The $27 million purchase was made by another consortium of publicans and investors including Dubbo’s Lee Green, Arthur and Stu Laundy, Sam Cruikshank and Sean O’Hara.
HTL Property brokered both deals and has presided over the sale of 38 regional hotel assets in the past 12 months.
HTL managing director Andrew Jolliffe says business is booming and the rising prices are more reflective of the actual value and potential of businesses in larger regional markets.
“Some of the areas we think have been mispriced by the investment market for some years. Increasingly, the pricing is becoming more aligned with the opportunities. It’s a vote of confidence,” he says.
As international travel came to an abrupt halt during the COVID-19 pandemic, Andrew says investors began looking for opportunities in their backyard.
“I think it’s forced people to look introspectively at some of those regional areas that otherwise might not have been travelled,” he says.
“They’ve seen the livability of these places, the accessibility and the fact that these towns can sustain businesses of scale.”
Andrew says pubs offer a unique, cash-based business model that investors are cottoning onto. They’re “malleable” enough that, while not virus or recession-proof, they can wind down and up quickly. Due to heavy regulation, the businesses tend to run tight ships and associated barriers mean they’re “very well protected”.
“Other pubs can’t just turn up next door,” he says.
Fraser believes Aussie pubs have come a long way from “just being corner boozers to being places that are focal points for a community”.
“Kids play areas, bistro and dining have all gone up to another level across pubs to restaurant quality.”
Harvest Hotels will be looking to rollout some renovations to their new Wagga investments in the year ahead. Fraser says, while it’s “all back-of-the-napkin stuff” for now, he believes the future is bright.