Hotel Sector to Recover Despite Coronavirus Shock

The Australian hotel market will bounce back despite a difficult start to the year with COVID-19, bushfires and Monday's stock market “flash crash”.

The daily dynamic pricing of rooms will likely help the hotel sector recover quicker than other markets, according to Colliers’ 2020 Capital Market Hotels Investment outlook.

Overnight visitor spend should grow from $70 billion in 2009 to a projected level of $131 billion by the end of 2020 due to the resilience and competitiveness of the Australian tourism industry.

The federal government's $76 million tourism recovery package will also provide a boost to the hotel sector encouraging tourists to travel across Australia.

Colliers International director of hotels Karen Wales said investors would look beyond one-off demand shocks to see the long-term strength of the accommodation sector.

“The positive nature of the longer-term fundamentals is what attracted $2.2 billion of hotel investment in 2019, a figure which is nearly 40 per cent above the longer-term average,” Wales said.

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The report also found the sector was trading at high levels of occupancy which should help buffer this latest economic shock.

“In 2019, occupancy across the 10 major markets sat at 78 per cent—this compares to a peak of 60.8 per cent and 73.4 per cent during the previous two supply cycles,” Wales said.

“It is important to also stress that accommodation demand is still majority driven by domestic markets, which insulates us from global shocks.”

Colliers’ head of hotels Gus Moors said in a sector where headlines were dominated by the coronavirus outbreak, it was important to reflect on the long-term growth of the tourism industry.

“The growth in spend has resulted in increased investment in hotel development over this time frame, which will see the sector deliver the 30,000 new rooms target across the ten major accommodation market,” Moors said.

“Supply is expected to peak in 2021, before moderating thereafter.”