The outlook for Australia’s accommodation sector is strong, reflecting both the increased demand for rooms on the back of growth in the domestic and international visitor markets, and the relatively low levels of new supply.
RevPAR on the rise
Capital city accommodation has seen high occupancies for the year ending February 2017. Hobart, Sydney, Melbourne and Cairns reported strong results of over 80 per cent (STR Global, Ltd). This demand has significantly improved the hotel sector’s Revenue Per Available Room (RevPAR) in recent years and is expected to continue to rise, with Deloitte Access Economics projecting growth of 3.1 per cent by 2019.
Future prospects remain positive
Deloitte Access Economics reported that the future prospects of Australia's accommodation sector remain positive. National occupancy rates are projected to climb to 70.8 per cent by 2019, with average room rate growth and RevPAR growth to reach 2.5 per cent per annum (a national average of $170 per night) and 3.1 per cent per annum (a national average of $123 per night), respectively by 2019.
Looking at the year ahead, visitors are forecast to spend $10.2 billion on hotel rooms in 2017, with that figure to rise by 5.3 per cent per annum over the next three years.
Solid returns, low risk
Compared to other property types, hotel investments performed favourably to July 2017. The risk return profile of hotel assets was superior to that of other asset classes, having similar volatility to industrial and office assets, however, considerably outperforming these with higher returns.
Recent Hotel Transactions
2016 continued to deliver a steady number of hotel sales across Australia, off the back of a record year in 2015. Colliers International (Hotel Sales, 2016) reported a total of $2.7 billion in hotel transactions for 2016, with key highlights including:
- The largest transaction of the year - the $700 million Ribbon development in Sydney's iconic Darling Harbour precinct
- Chinese investors continued to dominate over other buyer origins, with 37 per cent of the sales by value
- New South Wales led sales volume with an estimated 40 per cent of total hotel sales by value