A government in disarray has proved to be good business for Canberra hotels as lobbyists and politicians flock to the nation’s capital for reasons that still remain unclear. Consequently, Canberra has emerged as Australia’s most improved accommodation market with revenue per available room room increasing by almost 12% in the year to September 30, according to Savills Hotels.

Meanwhile Perth continues to struggle, hit by oversupply, slower demand, a sluggish economy and a surge of Airbnb listings. Sydney, on the other hand, continues its long-term out-performance in contrast to Melbourne, where rates and occupancies are under pressure from new hotel openings.

Other highlights of the Savills Hotel quarterly report include:

  • Australia wide RevPAR increases 2.3%. 
  • Best RevPAR growth markets: Canberra (up 11.8%), Cairns (up 9.4%), Sydney (up 6.2%)
  • Worst RevPAR performing market: Perth (down 13.3%)
  • Sydney continues to outperform Australian markets with a RevPAR gap of $40+ over the next best market performer (Melbourne wide market).
  • Canberra government and corporate activity continues to boost room night demand with the highest RevPAR growth for the period.
  • Hobart displays modest growth achieving the fourth highest RevPAR across Australia.
  • Gold Coast RevPAR flattens.
  • Cairns continues to perform strongly, recording the second highest RevPAR growth for the period.
  • Perth continues to fall with ADR decreasing by $14 due to new supply exceeding room night demand growth and a 50% jump in
    Airbnb listings to more than 8,000.
  • Adelaide displays continued growth with RevPAR increasing by 4.1%.
  • Darwin builds occupancy by 7.3% as ADR falls by 4.2% to achieve a modest increase in RevPAR.
  • Brisbane almost maintains YOY RevPAR International/Domestic Visitor Highlights (Y/E June 2017).

Capital Markets – Australia

  • With only 10 transactions recorded YTD (with sale value exceeding $5M) frustrated capital continues the struggle to find hotel assets.
  • The dearth of existing hotels for sale is fuelling investor appetite for new hotel development opportunities.
  • The lack of assets for sale is resulting in further cap rate compression, however latest data for YTD Sept 2017 show that passing yields are creeping back up to 7.32% compared to
    6.85% CY 2016 so perhaps pricing is starting to normalise after a hectic few years of sales activity.
  • It appears that continued cap rate compression is isolated to upscale/luxury hotels in key city locations, which shows no signs of slowing despite the slowdown of Chinese capital.
  • Counter cyclical opportunities in Perth and Brisbane are becoming increasingly popular.
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