QIC's freshly revamped $1.2 billion Eastland in Ringwood has beaten rival behemoth Chadstone to open the first Victorian hotel on top of a shopping centre.
While Meriton has operated serviced apartments atop Sydney's Bondi Junction shopping centre for nearly 15 years, Melbourne's first example is a long way from the beach, 23 kilometres from the city, deep in the eastern suburbs.
Next Story's five-level 120-room Sage Hotel Ringwood opened this week pitching its location halfway between Melbourne's CBD and the wineries of the Yarra Valley as a key selling point.
But the $1 billion investment in Ringwood's retail and transport infrastructure was also a major attraction for the hotel group, which is ramping up its local offerings.
"You can shop 'til you drop downstairs at the shopping centre and then go upstairs to the hotel or do some work in the co-working space," Next Story's Australia and New Zealand managing director John Warren said. "It's a new concept in Australia but they're everywhere in America and Asia."
The Singapore-based Next Story Group operates about 30 hotels in Australia, under the Sage and Next brands. It is opening three hotels at QIC properties, including an upmarket Next hotel at QIC's new 80 Collins Street project.
"The nature of the shopping centre and the amount of money spent on it by QIC is part of it. We wouldn't have been attracted to a second rate shopping centre," Mr Warren said.
A string of suburban hotels are planned or are opening, 20 years after the Novotel first opened a hotel in Glen Waverley.
A 166-room Hyatt Place hotel has opened at Essendon Fields; Mantra is due to open a 214-room hotel in Epping in 2019 near the wholesale fruit and vegetable market; and a 13-storey hotel has been approved for Chadstone Shopping Centre.
In Sydney, the suburban hotel sector is more mature. QT Hotels and Resorts is building a 14-storey hotel as part of a 52-level apartment building in Parramatta.
Colliers head of hotels Gus Moors, who sold the Glen Waverley Novotel last year for $76.6 million, said the trend is being driven by activity in the city.
"If you look a the occupancy rates in the Melbourne and Sydney CBDs they are running at high levels - 87 and 88 per cent year to date - and that creates compression out of the city and into peripheral markets," he said.
"That's one of the drivers but if you look at these types of regional locations, you'll see they have strong business demand drivers," he said.
Areas like Parramatta, Westmead and the Olympic Park precinct all serve corporate business precincts, he said.
"From an investment point of view, there's more value too. Land is available and cheaper and there's more opportunities relative to the CBD where they are very thinly traded markets," Mr Moors said.
The move comes as a new wave of consolidation hits the hotel sector. Hotel multinational Accor is paying $1.3 billion or $3.96 a share for the Mantra hotel chain in a deal that will almost double the volume of rooms under its control.
Accor is the biggest hotel operator in Australia with 210 properties under management and 30,000 rooms. Mantra operates 127 hotels and more than 20,000 beds.
Mantra recently acquired the Deague family's 1000-room Art Series hotel chain for $52.5 million.
While most of the Art Series hotels are located in CBD and fringe areas, its newest venture, the Chen is also in the suburbs and due to open in Box Hill next month on the road to Ringwood.