Hotel occupancy rates in Australia’s south east have hit record highs on the back of shifting patterns of demand and a modest, albeit strengthened, near-term supply pipeline, according to Deloitte’s latest ‘Tourism and Hotel Market Outlook’.
“As the Australian economy transitions from a growth phase underpinned by resource sector construction to a more diversified one, travel patterns are gradually shifting away from the big mining states,” said Deloitte Access Economics’ Lachlan Smirl in releasing the report.
“At the same time, improved conditions for leisure travel – both inbound and domestic – are underwriting robust demand growth across several regions.
“These trends have been mirrored across our hotel markets, with Brisbane and Perth receding from their resource boom highs, and Sydney and Melbourne recording their highest occupancy rates in more than two decades.
“Strong demand growth, coupled with an investment pipeline which has strengthened but remains modest in the near term, is seeing hotel occupancies push further into record territory nationally and across several individual markets.
“In fact, 2013 saw average room rates and the key indicator of Revenue per Available Room (RevPAR) grow faster than long term averages for Sydney, Melbourne, Tropical North Queensland, Darwin and Hobart.
“The future performance of Australia’s hotel markets will be shaped by a diverse set of influences which are impacting different markets to varying degrees.
“Improved conditions for inbound and domestic leisure tourism are being counterbalanced by a softer outlook for mining-related corporate travel.
“The strength of the hotel and room supply pipeline varies markedly across the country, with no projects on the horizon in several markets and relatively significant growth forecast for others.
“At the national level, with demand growing at nearly twice the pace of supply over the next three years, occupancy rates will be propelled further into record territory,” Smirl said.
Key Outlook forecast points include:
-Nationally, average occupancy rates are projected to climb from 66.8% to 68.9% to the end of 2016;
-Room rates and RevPAR are forecast to continue to grow at above trend rates – 3.4% and 4.5% per year to December 2016; and
-The longer term investment pipeline remains stronger – considerably up on that of two years ago, but broadly stable in net terms over the last 12 months, with 66 projects identified.
Sydney
-Forecast growth in international visitor arrivals remains robust and Sydney is among the most significant beneficiaries of this;
-With a modest room pipeline, occupancy rates are projected to push further into record territory, increasing to 88.8% by year-end December 2016; and
-Room rates are forecast to grow 4.0% to December 2016, to an average $228, and RevPAR is forecast to grow 4.9% per year.
Melbourne
-After a flat 2012 calendar year, Melbourne posted strong growth in occupancy and room rates, with both recording trend growth of 4.2% for the year to December 2013;
-Demand growth is forecast to outstrip new room supply by 1.7%, propelling occupancies further into unchartered territory – to 85.7% by December 2016; and
-Room rates are projected to grow 3.8% per year, to an average $209, underpinning RevPAR growth of 4.4%.
Brisbane
-The slowdown in growth in the mining sector is curtailing demand for short term accommodation in Brisbane;
Occupancies are projected to ease then recover over the next three years, reaching 80.2% by the end of 2016 – all but flat relative to today’s levels; and
Continued room rate growth – 3.4% per year over the outlook period to an average $191 is forecast – and RevPAR forecast to grow at 4.3% per year.
Perth
-Softening domestic corporate travel saw Perth’s occupancy rates for the year to December 2013 fall to 84.2%, after a record 2012;
-Occupancies are forecast to ease further as the city’s strong supply pipeline continues to be converted, declining to 79.4% in the year to December 2016;
-The residual strength of the mining sector will continue to underpin room rate growth – forecast at an average annual rate of 4.6% over the next three years to an average $220; and
-RevPAR will be weighed down by easing occupancies, projected to grow by 2.6% per year.
Adelaide
-Having eased over the first six months of 2013, occupancies rebounded to finish at 75.4%;
-After edging up over the first part of 2014, occupancies are expected to soften as additional room stock comes onto the market and then increase modestly, reaching 75.7% by December 2016;
-Room rate growth will be modest at 2.4% per year to December 2016, reaching an average $153; and
-RevPAR growth is projected to be similarly subdued – an average 2.5% per year over the next three years.
Canberra
-Demand for short stay accommodation in Canberra continues to stagnate, on the back of continuing fiscal consolidation from the Australia Government;
-Occupancies are projected to ease marginally, averaging 66.7% to December 2016;
-Scope for room rate growth will continue to be limited – projected to increase by 2.8% to an average $174 over the outlook period; and
-With occupancies easing, RevPAR is projected to grow at 2.5% p.a. to calendar year 2016.
Darwin
-Room rates in Darwin continued to grow at the nation’s fastest pace over the second half of 2013 – increasing 7.7% over the year to December 2013;
-Occupancy rates are expected to remain relatively constant over the next three years, averaging 78.2%;
-Room rates are forecast to continue to grow, but slower than over the last two years – 4.0% p.a. over the period to the end of 2016, reaching an average $190; and
-RevPAR growth is forecast at 3.9% p.a. over the next three years.
Gold Coast
-Improved conditions for leisure travel continued to see an improvement in hotel performance on the Gold Coast;
-With no new rooms likely over the next three years, modest demand growth will drive modest occupancy growth – increasing to 72.5% by the end of 2016;
-Room rate growth is forecast to be solid, but not outstanding – 3.2% p.a. over the three-year period to reach $157; and
-RevPAR is projected to grow by 3.5% per year over the outlook period.
Tropical North Queensland
-2013 saw a continuation of the improvement in occupancy rates which commenced in early 2011;
-With no supply increases in the near term pipeline, the occupancy outlook is for continuing improvement over the next three years – reaching 64.2% by the end of 2016;
-Subdued room rate growth is forecast – increasing 3.5% per year to an average $135; and
-Given the increase in occupancies, RevPAR is forecast to grow at a healthy 4.9% over the outlook period.
Hobart
-Strong growth in leisure travel saw average occupancies grow 3.7% over 2013 and room rates 4.6%, the fastest rate of any capital other than Darwin;
-With no supply additions over the outlook period, average occupancy rates are projected to climb to 77.7% over the outlook period; and
-Room rate growth will remain robust, forecast to grow by 3.0% per year, to an average $153, and pushing RevPAR higher at an average pace of 5.0% per year to the end of 2016.
Deloitte’s Tourism and Hotel Market Outlook utilises the forecasting, modelling and analytical expertise of Deloitte Access Economics, one of Australia’s leading economics advisory practices. The Outlook also draws on Deloitte’s real estate industry experience and insights, and a range of other sources, including hotel data generated by STR Global Limited.