Suite Success: Global Brands Fuel Melbourne’s Hotel Market Growth

Melbourne’s hotel sector is writing its next chapter, shaking off the post-Covid doldrums and winning the attention of global brands and alternative funding sources. And the transformation is happening across the city—from CBD luxury towers to suburban boutique offerings—even as the market contends with its largest supply surge of recent times. Take Accor’s expansion of its premium apartment hotel portfolio with The Sebel Melbourne Kew as an example. The newly upgraded 112-key property, comprising 89 hotel rooms and 23 apartments, is Accor’s ninth Victorian property under The Sebel brand and its 35th in Australia and New Zealand. “Melbourne metro accounts for the largest share of new hotel openings—this reflects ongoing demand driven by events, conferences and a strong recovery in international tourism,” Accor Pacific chief operating officer, premium, midscale and economy (PME), Adrian Williams tells The Urban Developer . “In Melbourne, you’ll find some of the finest new hotel offerings of this generation, creating a strong foundation for the next wave of tourism product. “Another prime example of this is the ... debut of The Hoxton, set to open in 2027.” Alfasi’s Matchworks development at Cremorne will include the debut of The Hoxton brand in Australia . The 198-key hotel, operated by international lifestyle brand Ennismore, plans to celebrate local culture through art, design and programming, with interiors inspired by the site’s industrial heritage. The Hoxton arrival adds another global brand to Melbourne’s expanding lifestyle hotel segment, particularly in emerging city-fringe locations. Accommodation Australia general manager Dougal Hollis says Melbourne’s hotel market has experienced remarkable growth since 2019. Melbourne pips oldest rival According to JLL research, by the first quarter of 2026, more than 7050 rooms will have been added to Melbourne’s hotel stocks, a 32.6 per cent increase over six years. Sydney, by comparison, will have added 3444 rooms, or 16 per cent more, for the same period. “Melbourne has led Australia’s new hotel construction pipeline since 2019, welcoming 81 new hotels, with the arrival of a plethora of new brands and the return of those not having graced our skyline for some time,” Hollis tells The Urban Developer . ▲ Accor Pacific chief operating officer PM&amp;E Adrian Williams. He says the market has attracted significant international investment, including global brands such as Hyatt Place, StandardX Melbourne, Quincy, voco, Courtyard by Marriott, Lanson Place, Ritz Carlton, and Shangri La, with the latter’s opening delayed until 2026. TFE Hotels group chief operating officer Chris Sedgwick says the uptick reflects Melbourne’s broad appeal. “The recent surge in hotel openings and planned developments shows a strong vote of confidence in Melbourne’s hotel market,” Sedgwick tells The Urban Developer . “This momentum is being driven by the city’s thriving events and entertainment and MICE [meetings, incentives, conferences and exhibitions] sectors, and underpinned by world-class infrastructure, hotels, operators, and venues.” Investment activity is expanding beyond the CBD. MA Financial Group’s acquisition and rebranding of Vibe Hotel Melbourne Docklands in early 2024 and Shayher Group’s billion-dollar investment in Destination Pentridge, including an Adina Apartment Hotel, show growing confidence in city-fringe locations. Supporting this development pipeline is record growth in visitor expenditure—$39.7 billion in the year ending September 2024, a 26 per cent increase from pre-pandemic levels. According to Hollis, projections show this could reach $53 billion by 2028. Sector financing evolves The financing landscape for hotel developments is evolving too with Merricks Capital’s delivery of the $150-million Melbourne Place hotel in the CBD a strong example. The 191-room development, which opened in November of 2024, shows the emerging role of private credit platforms in the sector. Merricks Capital’s intervention in the Melbourne Place project, after taking control when the original developer defaulted, shows the shifting dynamics in development financing. ▲ TFE Hotels group chief operating officer Chris Sedgwick. The project’s completion and subsequent acquisition by Ark Capital Partners has illustrated the sector holds viable alternative funding routes as major banks reduce exposure to property. Private lenders are filling the gap left by traditional banks, with the RealfinX real estate and investment data platform reporting there is $1.3 trillion in unallocated capital targeting real estate globally. However, the model faces growing scrutiny as regulators including the Australian Prudential Regulation Authority closely watch this rapid expansion in alternative funding. The Urban Developer Hotel Summit | A one-day conference dedicated to the hotel and accommodation sector in Australia. Click here But for all the good news stories, the market still faces challenges. Melbourne’s hotel room supply has grown by 21 per cent since 2019, with occupancy rates averaging 69.8 per cent year-to-date in 2024. This is a 3.7 per cent increase from the previous year but it is well below the historical 85 per cent year-round occupancies recorded pre-pandemic. Government support for tourism promotion has also been reduced—Visit Victoria’s marketing budget was cut from $32.5 million annually to $32.5 million over four years in the Victorian State Budget of May last year. That comes at a time when increased promotion is needed to drive visitor demand for Melbourne’s expanded hotel stock. Construction costs present additional hurdles. Savills analysis indicates increases of 3.5 per cent to 4 per cent a year from 2025-2029. Despite these pressures, ongoing population growth and tourism recovery continue to support demand for hotel space, particularly in prime locations. ▲ Accommodation Australia general manager Dougal Hollis. Melbourne’s projected population growth to 6 million by 2031 to become Australia’s largest city reinforces long-term sector confidence. “This population growth, coupled with the expected 211 per cent increase in passenger numbers for Melbourne Airport across the next 18 years, will undoubtedly stimulate increased demand, and investor appetite, for new hotel construction, across Victoria,” Hollis says. McVay Capital and Advisory founder Sam McVay says a weaker Australian dollar could benefit the tourism market by attracting international visitors. “I think this is going to be a golden era of trade in Australia,” McVay tells The Urban Developer . Reinvention meets changing demands The evolution of existing properties signals market maturity. The reimagined Rydges Hotel Melbourne demonstrates how established venues are adapting to market changes, with its transformation of the former Bobby McGee’s nightclub into an events venue. Similarly, Sedgwick points to enhancements at the Vibe Hotel Melbourne, including the launch of Fleet rooftop bar and OneQueen restaurant, as evidence of ongoing reinvestment in existing assets. Melbourne’s diverse visitor economy also continues to drive market fundamentals. “The compact diversity of our city is attractive to domestic and international visitors alike,” Hollis says. “Being able to walk from the city to an array of major sporting, arts, theatre and cultural precincts, all within easy reach, is certainly a significant drawcard and tough for other cities to replicate.” According to Savills research, this combination of infrastructure development, population growth and tourism recovery continues to attract investment despite short-term occupancy pressures, highlighting the market’s long-term resilience in Australia’s hotel sector. “From our point of view, there’s no doubt that Melbourne’s appeal as a premier events and travel destination continues to grow and, as hoteliers, we’re proud to be playing our part,” Sedgwick says. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Suite Success: Global Brands Fuel Melbourne’s Hotel Market Growth

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