Bruce McKenzie, IHG

Bruce McKenzie, IHG

WORSE is still to come for faltering Australian hotel markets with room rates set for further falls as hoteliers slash prices to prop up declining guest occupancy levels.

Stella Hospitality CEO Bob East predicted the current discounting cycle had a long way to run. “I don’t think you can defy gravity,” Mr East said.

Bruce McKenzie, regional Chief Operating Officer for InterContinental Hotels Group, said key markets are still in decline.

“You know how bad it is when everyone is chasing air crew and air crew rates are going through the floor,” said McKenzie. “Our view is it’s going to get worse (although) it’s very difficult to predict what will happen.”

Overall, Mr East and Mr McKenzie predicted that prices and occupancies would not start to rebound until the first half of 2011 – at least 18 months away.

Others industry leaders at the recent ANZPHIC hotel investment conference such as Simon McGrath, Vice President Australia – Accor Asia Pacific, were more optimistic.

Mr McGrath predicted a market bounce in 2010, though he admitted forecasting was extremely difficult.

“We’re still an industry chasing revenue and I don’t think anyone has given up on that,” McGrath said.

“There is evidence we can generate business out of all market sectors but we’re struggling to find any kind of trend.”

Perth remains the strongest of all Australian hotel markets but is now coming off the boil.

“Think for the last couple of years there’s been a lot of froth in Perth and now there’s not,” Mr McKenzie said.

Chairman of Quest Apartments, Paul Constantinou, said Perth was “a very tired city” in terms of its accommodation offering.

“Look at some of the stock,” he said. “This is what represents us a country – what are we really marketing here?”

Apart from Perth, Brisbane and Adelaide have also been solid performers but are now feeling the pinch.

In terms of rates, all eyes are on Melbourne, which many in the hotel industry believe is heading for a crash with 3000 new rooms coming on between 2009 and 2011.

But despite the bad news, industry analyst STR Global said Australia remains a relatively strong and stable performer in a regional context.

Jonas Olgren, STR Global Director-Asia, predicted Australia will rebound much stronger than Asian markets like China and India.

“We are still seeing cranes in Beijing and Shanghai – people are still building hotels while occupancy is running at 40 per cent.”


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