Good Times Ahead For Australian Hotels But Two-Tier Market Emerges As Some Owners Fail to Invest

The outlook may bright for the Australian hotel industry thanks to increasing tourism and a stable economy but one of Australia’s leading analysts warns that older independent properties that have failed to invest and modernise are getting left behind.

Dean Dransfield told delegates at No Vacancy there is firm evidence this trend is already happening, citing the disparity between the Australian Bureau of Statistics performance figures and those of STR Global, which is weighted to the major groups.

In the 2015 financial year RevPAR at STR monitored properties grew by 4.2% compared with 1.6% at ABS hotels, which tend to be smaller, independent and older.

“We are seeing a two-speed market,” he says, adding that this gap is poised to widen.

No Vacancy 2016 - Dean DransfieldAs for the overall Australian hotel market, Mr Dransfield says it’s in good shape thanks to strong, sustained visitor night demand which Tourism Research Australia forecasts will average 3.9% a year through to 2023.

Even the laggards he says will be recording positive growth.

Darwin, for example, which has been hit by increase in supply and less demand, will still grow at 2.3% a year in terms of revenue per available room (RevPAR).

Mr Dransfield predicts that despite economic uncertainty and a looming supply wave, Brisbane will have the strongest long-term RevPAR growth at 4.8% pa, closely followed by Sydney and Cairns (+4.6%), Melbourne (+4.5%) and the Gold Coast (+4.4%).

Surprisingly, Hobart, which has been a really strong performer of late, is one market he is concerned about.

And it’s all down to supply with a 30% boost in new rooms looming over the next six years.

“Can Hobart take it? Maybe. Would I be scared if I was in Hobart? Probably.”

This is despite that fact it’s very hard to get a room in Hobart at the moment with tourism on a roll.

However, he believes the Hobart numbers are fuelled by one-time leisure visitors who will do the weekend Museum of Old and New Art and food thing, rarely to return.

Perth, Sydney,  Brisbane and Melbourne are the other markets where supply is expected to increase by 25% or more (up to 40% in the case of Perth) in the present development cycle.

He says Perth is the most vulnerable – will leisure replace slumping mining demand? – but the other markets should handle the extra rooms.

The characteristics of this development cycle include:

“Far fewer apartments being built than in the last cycle and far more upscale hotels.

“The properties also tend to be smaller.

“Most in the 300 to 350 room category with a few exceptions.”

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