In HM’s 2023-2024 Hotel Development Outlook, Colliers Head of Hotels – Australia, Karen Wales, discusses market activity and the future outlook for development.

Australia’s accommodation market has continued to expand with the opening of around 3,420 rooms through 2022 in the 10 major markets.

Whilst projects opening in 2022 represented a moderation from the more than 5,000 rooms which opened in 2021, the expansionary phase of the hotel market cycle is expected to continue over the medium term with a further 12,500 rooms currently under construction and scheduled to open over the next three years.

This will result in a 10% increase on the December 2021 base inventory. 2023 now presents as the peak of the hotel accommodation supply cycle.

In terms of new hotel projects, proposed rooms have, for the time being, moderated. The delivery of new hotels is for now held back by both escalating construction costs and investors taking a ‘watch and wait’ position as demand catches up with supply and trading markets ‘normalise’.

The Rider Levett Bucknall (RLB) report on Construction at Q1 2023 highlights how Australia, like many other countries, has experienced sharp increases in construction escalation over the last two years due to a variety of factors, including sharp changes in material prices, labour costs, and other significant internal and external factors.

The government is also fast-tracking major transport projects putting additional pressure on costs with nine projects of more than AU$5 billion underway.

Escalation forecasts of RLB’s offices indicate a slowing of the increases seen over the past two years, with 2022 being the peak rate of escalation for most capital cities. Increases remain higher, however, than the decade averages previously seen across the country.

This article was first published in HM Magazine June 2023.

For the full 2023-2024 Hotel Development Outlook, click here.