Australia's Hotel Market and the 'Room Boom'

Australia's hotel property sector is still outperforming other property classes in the market, and the Australian industry is one of the biggest growth regions on the planet.

The Tourism Accomodation Association, which is part of the Australian Hotels Association, announced at a recent industry conference that the country was in fact in the middle of a "room boom" and that overseas visitors to Australia had risen by 11 per cent in year-over-year comparison models.

In data released earlier this year from Savills Australia’s Hotels market report, this type of growth has not been seen in Australia since Sydney hosted the Olympics, spurring 7,500 rooms to be added to the continent in a two-year span between 1998 and 2000.

Despite words of caution from some, tourism continues to bolster Australia's pipeline, trickling down from Sydney and Melbourne to Cairns, Brisbane and Adelaide, with four projects currently under way in Cairns, nine in Brisbane and seven in Adelaide.

By 2019, according to the Top Hotel Projects Database, a projected 94 hotel projects will have been added to Australia, bringing nearly 34,000 new rooms to the country.

According to Michael Simpson, Savills Managing Director of Hotels, “Chinese visitor growth of 22% is the dominant contributor to this stellar performance, which is being driven by a growing Chinese middle class having access to increased air capacity between China and Australia, as well as the relatively low Australian dollar making the country a more affordable destination.

Tourism Research Australia’s 10 year forecast provides a positive outlook for continued growth with International visitor nights and Domestic visitor nights expected to grow at 5.6% and 3.1% annually respectively. Australia can expect to see increased room night demand nationally for the foreseeable future.

The Australia wide market achieved a "revenue per available room" (RevPAR) for CY 2016 of $139, which represented year-on-year growth of 2.2%.

All Australian cities posted RevPAR growth except Perth, Brisbane and Darwin with RevPAR declining in those cities by 9.3%, 8.7% and 9.6% respectively. The decline in performance of these markets is primarily a result of the curtailment of resource investment activity following the end of Australia’s resource boom, and increases in room supply.

For the remaining markets, growth in market KPI’s can be attributed to an increase in leisure demand from domestic and international markets, stimulated by a lower Australian dollar and stronger economic activity underpinned by construction and infrastructure projects.

Simpson believes that China is the engine room for visitor night growth in Australia right now, after Australia received over 7.4 million international visitors (up 11.5%) and 251 million international visitor nights (up 3.8%) for the year ended 30 September 2016.

One of the reasons for this boom could be an influx of residential developers turning to the hotel industry in mass to help meet demand.

Melbourne has been especially popular due to its surging growth and vibrant economy. At present, the city has more than 5,000 new rooms under construction or planned, including high-end luxury staples such as a

W Hotel and a

Ritz Carlton, both of which are expected to open by the end of the year 2018.