22 May 2012: Australian hotel room occupancy rates will continue to grow over the next three years -- from 65% to 68%, their highest in decades.
The forecast by Deloitte Access Economics in its latest Tourism & Hotel Outlook is consistent with expected growth in international visitors, strong domestic business travel and a modest roll out of new hotel developments.
Deloitte Access Economics’ Lachlan Smirl said: “Australia’s underlying economic drivers remain strong, as do forecasts for international visitor arrivals and domestic business travel.”
“Occupancy rates at these levels have not been seen since we have had access to consistent and comprehensive data. Demand in capital cities in particular has grown, and will continue to grow, strongly. But the stock of rooms, or room nights available, has grown just 2.8% over the last four years.
“Looking forward, growth in demand is projected to continue to outstrip growth in supply. Room nights sold are forecast to grow by 2.3% a year, with room nights available to grow by just 0.7% a year. It’s not surprising, therefore, that room rates and occupancies are on the up.”
“A clear gap between hotels in regional areas and capital cities will remain. We forecast regional occupancy rates to reach 60% by the end of 2014, compared with 80% or higher in many of the mainland capital cities.
“Among other things, this reflects the continued shift in the nature of the visitor economy, with international travellers and the business segment becoming more prominent, and their hotel stays being heavily geared towards capital city destinations.”
Mr Smirl said that with Australia’s investment performance being driven primarily by the mining industry, other sectors, including hotel construction, were weaker.
“There is no big news on the supply side,” he said. “The ‘definite’ pipeline in hotel development remains weak, with an 8% decline in value of committed hotel and resort projects over the past year.
“While the value of those ‘in planning’ – which may or may not go ahead – has improved 30% since late 2010, overall the investment pipeline remains weak. That said, the Federal Government has recently announced a plan to prepare an annual list of ‘investment ready’ tourism projects as a strategy to encourage investment in hotels, especially in capital cities.”
In terms of room rates, key points from the Outlook include:
Projected average yield per room (Revenue per Available Room – RevPAR) is forecast to increase by an average annual rate of 5.5% over the next three years, reaching $110 by the December 2014 quarter – unchanged from the Q1 forecast
Average room rates are forecast to increase to $163 by the end of 2014, growing at an average annual rate of 4.1%.
Key points by city/region
Occupancy rates remain the highest in Australia, although forecast increases in occupancy rates will be more modest than in other markets, growing just 2% to 88% by the end of 2014
Room rates are expected to grow by 3.9% annually, increasing to $210 by the end of 2014.
The Melbourne market is expected to remain weaker than others, with the overall weakness of the Victorian economy flowing through to the hotel sector
The three-year forecast is for average annual room rate growth of 4.3%, still higher than the national average, while occupancy rates are still forecast to grow strongly – reaching 85% by the end of 2014
Occupancies are forecast to remain flat over the projection period, finishing the outlook period just 1% higher than today’s levels
The Brisbane market will still continue to benefit from the Queensland’s resource-related activity, with room rates projected to grow strongly – an average 7.5% per year to $208 by the end of 2014.
Room rates are forecast to become the highest in Australia by the September quarter of this year, on the back of the sustained strength of mining-related business travel
Room rates are projected to reach $249 by the end of the forecast period, an average annual increase of 14% – more than three times the national average.
Room occupancy rates in Adelaide are forecast to be flat over the forecast period, gaining just 1% over the next three years
Room rate growth has been stagnant but is expected to increase modestly over the forecast period by 3.7% per year to $159 by the end of 2014 – slower than other mainland capitals.
Occupancy rates are forecast to be flat for the first three quarters of 2012, before increasing at a steady pace, rising from 73% at the end of 2011 to 79% by the end of 2014
Room rates are forecast to increase by an average annual 5.2% over the forecast period, reaching $185 by the end of 2014.
Even after adjusting the figures for seasonality, Darwin’s hotels have the lowest occupancy rates of any capital city, at 71% but, driven by mining activity in the Northern Territory, occupancy is forecast to increase strongly over the next three years, reaching 78% by the end of 2014
Combined with an increase in room rates of 5.9% per annum over the next three years, yields in Darwin are forecast to grow strongly, overtaking Adelaide and reaching $131 by end-2014.
Room occupancy rates are projected to increase from 66% in the final quarter of 2011 to 69% by the end of 2014
Yields are expected to grow moderately, increasing by 5.2% per year over the next three years to a RevPAR of $100 at end-2014.
Tropical North Queensland
Strong recovery in occupancy rates following the natural disasters of 2010 are forecast, growing by almost 9% to 67% over the next three years
Much lower room rates than seen elsewhere in Australia are helping to drive this increase in occupancy, but annual growth in room rates of 5.1% over the next three years to $134 by the end 2014 is forecast.
Please download the Tourism and Hotel Market Outlook Q2 2012 report and the media release above.
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