Hotel Recovery Begins as Lockdowns End


The end of lockdowns in Sydney and Melbourne has sparked a rebound for occupancies across the country’s beleaguered hotel sector of up to 50 per cent as of the end of October.

Australia had been one of the highest-performing countries for occupancy rates until lockdowns in our two largest cities pulled national occupancy down to as low as 25.9 per cent in August, 2020.

According to new figures from analysts STR, the turnaround has been strongest in Victoria, with 56.9 per cent of hotel rooms now occupied—six days earlier it was just 22.6 per cent.

Similarly, NSW’s hotels have seen a boost in occupancy, up to 48.4 per cent after an early October low point of 10.6 per cent.

STR regional manager for the Pacific Matthew Burke said Sydney, which was below 20 per cent in early October, had improved to 37 per cent during the final Saturday of the month while Melbourne, which had been stuck in the mid-20 per cent range, climbed to 33.5 per cent.

“Lockdowns and state travel restrictions have made the past four months extremely difficult for the hotel industry, however, a progressive approach to vaccinations and the easing of restrictions have led to an increase in travellers and hotel demand with leisure guests driving performance,” Burke said.

“Based on our forward-looking data, and from the experience of Australia’s first recovery, we will likely see that leisure demand dominate recovery for the rest of 2021.”

The International Air Transport Association is forecasting a strong recovery in the near future, with global air passenger volume projected to recover to pre-pandemic numbers by 2023-2024.

Countries like Australia with a large pool of domestic travellers, as well as New Zealand, mainland China and Japan, are already leading the rebound, supported by the introduction of government investment and policies to stimulate domestic tourism.

In March, the federal government announced half-price airfares for 800,000 domestic travelling to destinations normally frequented by overseas tourists as part of a $1.2-billion package to keep the international tourism sector afloat.

Global air passenger volume 2018-2030

Source: IATA
▲ Source: IATA

Despite average occupancy rates tumbling around the country throughout the pandemic as international borders remain closed offshore capital is continuing to pour into the sector.

According to CBRE Hotels, despite the recovery weakening from June due to lockdowns in Sydney, the improved confidence had meant $6.5 billion in transactions in the Asia Pacific region across the first three quarters of the year, 5 per cent higher than the same period last year.

“Investor sentiment strengthened significantly over the course of the year as the vaccine rollout gained momentum and an economic recovery came into view,” CBRE head of hotels Steve Carroll said.

“Although the gap between buyer and seller expectations still exists, it is narrower compared to 2020.

“There continues to be a large quantum of capital looking for returns in the hotel sector, with experienced investors set to turn more active in the coming months.”

In Australia, major hotel deals worth $1.2 billion have been struck for the year to date, more than double the same time last year.

This figure received a huge boost from the record $620-million acquisition of the Travelodge portfolio by fund manager Salter Brothers, in a joint venture with Singaporean sovereign wealth fund GIC and Swiss-based investment manager Partners Group.

The 2000 room portfolio sold more than $100 million above its 2020 book value and almost $40 million higher than its pre-pandemic valuation of $583 million, despite seven of the 11 hotels being in Sydney and currently closed.

Other deals include the sale of Jerry Schwartz’s Four Points by Sheraton Sydney hotel for about $150 million to Colorado-based tourism group KSL and the Primus Hotel in the Sydney CBD bought by fund manager and developer Pro-invest for $132 million.

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