StayCo to acquire new properties as its short-stay assets outperform Gold Coast market

The short-stay market is tracking well above pre-pandemic levels for Gold Coast accommodation group StayCo, with growth in average occupancy and room rates for May significantly outperforming the broader market.

The buoyancy of the local tourism market and the group’s performance has led StayCo to acquire two new properties on the Gold Coast, affirming the group’s position as the largest operator of short-stay accommodation in Broadbeach.

StayCo, an arm of listed diversified financial service group Finexia (ASX: FNX), has reported that the average occupancy across its Gold Coast portfolio was 28 per cent higher than pre-pandemic levels, compared to 17 per cent for the broader Gold Coast market.

This is despite a pullback in domestic visitor numbers to the city which spiked during international travel restrictions.

StayCo has also managed to achieve higher revenue growth with the average daily room rate for its portfolio 20 per cent up on this time last year, or almost three times the 7 per cent increase across the Gold Coast market.

“While consumers are tightening their belts, our revenue is still 20 per cent above pre-pandemic levels,” says Patrick Bell, director of Finexia.

“That’s been aided by room rates remaining high which has effectively become the new normal for the market,” he says.

“This growth has been reflected across our portfolio’s performance, which has been trading strongly despite the broader market headwinds.”

Stayco, which operates eight properties in southeast Queensland including five on the Gold Coast and one at Noosa, has acquired two more Gold Coast properties to capitalise on the continued strength of the local tourism market.

“We’re acquiring another building in Broadbeach and tapping into the popular Burleigh Heads market for the first time,” says Bell.

The new properties, which are currently under contract, will help boost StayCo’s gross booking revenue to $36 million a year and annual revenue to $16.1 million.

Following the acquisitions, StayCo’s portfolio will have a concentrated footprint in the Broadbeach, Surfers Paradise and Burleigh Heads markets, which are among the most popular destinations for locals and interstate visitors. It will also boost the number of apartments under management by the group to 1,400 lots with 631 under direct management.

Stayco’s Gold Coast properties, located with a 5km radius of each other, are expected to generate 86 per cent of the group’s EBITDA for FY24, reflecting the high yields delivered by the city’s tourism market.

Stayco plans a seamless transition of ownership for the new acquisitions, which have yet to be disclosed, with existing managers remaining in place and no further capital expenditure needed on the properties.

The two new Gold Coast acquisitions are being funded by a $7 million capital raising by the Stay Company Income Fund, which represents just the second funding round by the fund since 2021 when it raised $14 million to seed the portfolio.

The funding round, which is open to wholesale and sophisticated investors with a minimum investment of $50,000, has a targeted return of 10 per cent per annum, in line with the first round. However, the fund has been paying monthly distributions at the rate of 12 per cent per annually since inception.

Bell says the continued strength of the local drive market, which represents about 40 per cent of revenue for its Gold Coast assets, underpins the stability of the Stayco business and group cashflow.

“Broadbeach and Surfers Paradise is also very popular with visitors from NSW and Victoria,” he says.

“We don’t compete with hotels; nearly all of our guests are families that require amenities.

“Our portfolio sits in the middle market. We’re certainly not a budget option but we’re also not a five-star hotel, which positions us well to capitalise on a niche that is experiencing solid demand.

“This is also a really great business in a high inflation environment as we are able to reprice our product every single day, which provides a great deal of protection for the business model.”

The Stay Company Income Fund is open to wholesale investors that Bell says typically can include self-managed super funds.

“The investment generally appeals to people who understand the industry and people who want exposure to the domestic tourism market,” he says.

“In the last 12 months, spending on holiday accommodation in Australia has increased by more than 20 per cent. This has been a fast-growing market for a while now and considering the sustained high prices of international flights, we’re pretty bullish about our near-term future as well.”

StayCo’s property portfolio includes two long-stay properties in Brisbane, which are legacy assets for the group, and the Ivory Palms tourism property at Noosa.

The group’s existing portfolio on the Gold Coast comprises Bel Air on Broadbeach, Ocean Pacific Resort, Belle Maison and South Pacific Resort, all in Broadbeach, and Artique Resort, in Surfers Paradise.