In Canberra, home of Australia’s Federal Parliament, politics are business. So it should come as no surprise that with Tony Abbott’s Liberal-National Government performing so poorly, Canberra’s hotel market is in something of a hole.
Yet it does come as something of a shock that STR Global figures show Canberra is Australia’s worst performing major hotel market with 28 straight months of negative growth.
Because Canberra, a city created as political compromise in the 1920s, has always operated differently, a world apart, full of bureaucrats, cul-de-sacs, diplomats and quiet, empty streets.
Between 2006-2010 the Canberra market had 40 straight months of earnings growth, sparking thoughts that it would never end.
However, these latest figures show that even Canberra is not immune to the basic laws of supply and demand.
There’s been at least seven major hotel openings in recent years plus a slew of serviced apartment developments equating to a minimum 6.7% increase in supply, according to STR.
Meanwhile demand was flat – which was bad enough – then the Abbott Government got elected in 2013 and things got worse.
The number of visitors to Canberra started falling, exacerbating the supply scenario, dragging down room rates and occupancy.
STR Global estimates Revenue Per Available Room in Canberra fell 7.6% in 2014, with anecdotal falls of up to 15%.
“The market collapsed when the coalition came to power,” said one local tourism exec. “The biggest falls have been where’s there’s a reliance on government business.”
Not only has there been less business but the shift to centralised govt rate negotiation (rather than different departments doing it separately) through the AOT Group – giving it huge clout – meant some suppliers dropped their pants to get the business.
Meanwhile there have been structural shifts in the way rooms are booked.
Previously, good Canberra hotels would be sold out 5-7 days out from a parliamentary sitting week, but now it’s all happening in the last 24-48 hours as people scramble for the best deal.
So with all this bad news – and several more hotel openings on the horizon – you’d think local hoteliers would be pessimistic about the year ahead.
Todd Handy, GM of East Hotel, which opened in 2012, said: “I’m quite optimistic to be honest, our numbers are looking quite strong.”
But he did admit the past couple of years have, at times, been challenging.
“We came to market at a funny time, just before Julia Gillard called the election so nobody wanted to do business with the (Labour) government,” he said.
Then Kevin Rudd overthrew Julia Gillard, leading to more confusion, until finally the Abbott-led coalition was elected.
The biggest trend has been a dip in Government business, he said.
“What we have seen with the latest government changeover is more contractors and less government employees.”
As for the year ahead, Mr Handy believes the older hotels are under the most pressure as consumers ditch allegiances and head for flash new hotels.
One such property is the Hotel Kurrajong, which is being officially opened by PM Tony Abbott on Feb 7.
The original property was built in the 1920s and it’s now been meticulously restored with an emphasis on its art deco origins.
Rooms have been selling for $169 during the soft opening phase and GM Robert McKenna aims to lift that to between $210 and $250 during the year.
Mr McKenna said while there may be some short-term challenges, Canberra has a solid future – ironically on display via the amount of investment in the city’s hotel infrastructure.
“The mood around Canberra is one of cautiousness,” he said
“I’d like the government market to be a little more buoyant than it is right but we have faith in the market long-term.”