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Second-tier cities power ahead in 2019 hotel market

Adelaide was one of a few standout performers propping up average RevPAR levels in 2019.

Demand for rooms in Brisbane, Adelaide and Hobart have helped to offset somewhat a national decline in hotel RevPAR, according to the 2019 Marketview report released this week by CBRE.

Despite ongoing question marks over travel demand, hotel transactions ended the year in good shape, with the final quarter along bringing $360 million in hotel real estate sales, nearly half of which coming from domestic investors. The biggest individual sale for the quarter was the Vibe Hotel Sydney, which was snapped up by a Thai investor for $108 million.

Three Australian cities – Brisbane, Adelaide and Hobart – were the year’s standout performers in terms of occupancy, RevPAR and Average Daily Rate, with all three cities preparing to welcome new hotels in 2020 including Hotel Indigo and The Tasman – a Luxury Collection Hotel – both opening in 2020. In Hobart, the pipeline is so strong that it will account for the city’s entire supply once fully operational, however downward pressure on rates is forecast as this new supply beds down.

More moderate development will be seen in Brisbane and Perth, CBRE found, as demand continues to buck the trend and outpace new supply coming online. In Perth, this new supply is being stimulated by renewed interest among visitors and a steady stream of major sporting fixtures heading west to ensure hotels receive regular occupancy boosts.

Tourists couldn’t get enough of Hobart in 2019, with occupancy and RevPAR skyrocketing.

Significant increases in government infrastructure in Adelaide is seeing the city evolve into one of Australia’s leading tourism markets. This, coupled with booming employment hotspots, is attracting investors, drawn to the prospect of strong demand for rooms and buoyant returns driven by competitive room rates. The City of Churches will open 680 new rooms in 2020, with projects under construction to see the supply line swell with a further 500 keys in coming years. Of this, a strong supply in the luxury market segment is forecast to drive new demand channels and new demographics considering the city for their next holiday.

In Melbourne and Sydney, nearly 7,000 new rooms coming online under active construction are due to come online by the end of 2022. With both cities enjoying robust demand driven by major events and corporate patronage, higher construction costs and softer trading conditions could see some of these projects either delayed or shelved entirely. The recent opening of the new CBD light rail in Sydney has proven the government is capable of delivering on infrastructure which could see renewed appeal among both domestic and international visitors. The NSW capital ended 2019 with 20.7 million room nights – a 7.2% increase on the year before.

To read the report in full, CLICK HERE.

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