Australia's Hotel Industry Growth
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 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 acheiving occupancy in excess of 80 per cent for YTD July 2019, with Melbourne's falling just under 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 $2.2 billion in hotel transactions for 2019 based on 45 deals, with key highlights including:
- Queensland was one of the more active hotel investment market (16 assets transacting) as investors made counter cyclical plays, capitalising on improving fundamentals in Brisbane and ongoing strength of trade in the key leisure markets.
- While Queensland had higher transactions, volumes in New South Wales and Victoria were higher, aided by a few major CBD sales.
- Offshore capital continued to dominate, accounting for approximately 50% of transaction volume, with a notable broadening of the capital base with investors sourced from Singapore, New Zealand, Hong Kong, Middle East, Germany, Thailand and the United States. Chinese investors were also present, with three major acquisitions occurring throughout 2019.
- Investment funds emerged as the most active buyer group in 2019, accounting for over 40% of deal volume and with growing activity over the past five years. New funds are also being raised targeting the Australian hotel sector, against a weight of global capital targeting real estate.
- 2020 will represent a year of significant rooms supply increases across the country. In addition to the circa 6,000 rooms added in 2019, an additional 10,000 rooms are anticipated to open across the main markets in 2020.
Source: Colliers International Hotel Sales 2019