Hotel Industry Trends

Accommodation Pipeline

After a prolonged period of limited new supply, developers have begun to recognise Australia's solid demand fundamentals and the major markets are now seeing a range of exciting hotel product being built. 

As of January 2020, there are a total of 57,316 rooms in the hotel development pipeline until 2028, from a total of 332 projects. 

RevPAR to return to growth

While recent supply growth has impacted hotel performance across most of Australia's major markets, long-term projections are for all capital cities to return to growth. Dransfield's Hotel Futures 2019 report forecasts high occupancies to underpin long-term growth of both demand (4.0 per cent p.a.) and RevPAR (3.3 per cent p.a.) annually to FY2027.

Recent STR figures show growing supply in all major markets is having a dampening impact on occupancy and rates as the number of new rooms added is growing faster than additional rooms sold. Sydney and Hobart are achieving occupancy in excess of 80 per cent for YTD July 2019, with Melbourne's falling just below this. Sydney was the top performer nationally in terms of RevPAR. For more information, visit STR's website. 

Future Prospects Remain Positive

In its Futures 2019 report, Dransfield Hotels & Resorts projects Australian major city RevPAR to grow at a healthy average of 3.3 per cent p.a. over the long term (to FY 2027) and 4.1 per cent after FY2019. They expect a positive supply and demand equation and sustained high occupancy levels will create rate growth opportunities, with growth expectations still well above recent history, which averaged 2.2 per cent p.a. over the last five years.

Recent Hotel Transactions

Colliers International reported a total of $1.8 billion in hotel transactions for 2018 based on 37 sales, with key highlights including:

• Queensland was the most active hotel investment market ($491 million) as investors made counter cyclical plays, capitalising on improving fundamentals in Brisbane and ongoing strength of trade in the key leisure markets.
• Volumes in New South Wales and Victoria were solid, aided by some big-ticket sales, and the Northern Territory witnessed its largest single investment since 2010 with Delaware North's acquisition of the Darwin casino. 
• Offshore capital continued to dominate, accounting for two-thirds of transaction volume, with a notable broadening of the capital base with investors sourced from Singapore, Malaysia, Thailand, Middle East, Hong Kong, India and the United Kingdom. 
• Development sales were prominent throughout 2018 with notable transactions including the Quincy Melbourne. More development sales are expected over the coming year with projects currently being marketed in Canberra, Sydney, Adelaide and Melbourne. 
• Hotel openings are expected to peak in 2019 with the opening of more than 6,500 new rooms in the ten major accommodation markets. Deal flow is also expected to increase as owners respond to changing market conditions, particularly in markets with new supply. 

View a list of significant hotel transactions from across the country

Source: Colliers International Hotel Sales 2018