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NEWS

Outlook for hotels sector bright as office vacancy falls

Hotels research identifies strong fundamentals in Sydney and Melbourne.

Australia’s hotel market, particularly in Sydney and Melbourne, is set to benefit from a number of positive fundamentals including falling office vacancy levels, strong growth in international tourism arrivals and significant investments in tourism-related infrastructure according to the latest research from Colliers International.

“Sydney continues to be the leader in hotel performance across the country, with occupancy levels above 87 per cent, average room rates up 6 per cent and RevPAR increases every year for the past seven years,” said Gus Moors, Head of Hotels at Colliers International.

“Importantly, the hotel market is impacted by the strength of the corporate segment. A pick-up in business travel will contribute to increased confidence in the CBD hotel sector. This is most pronounced in the Sydney market where our Colliers Edge data service is predicting office vacancy to be at its lowest level since January 2008, and we don’t expect vacancy levels to increase until the end of 2019.

“In addition, Sydney CBD white collar demand is forecast to increase by 2.9% by the end of 2016, well above the annual average. This all points to a strong performance, particularly in the markets of Sydney and Melbourne.”

For the year to September 2016 Colliers International tracked 42 hotel transactions representing a total of $A 2.2 billion. This compares with 52 hotel transactions of $A 3.1 billion over the same period in 2015. The $700 million purchase of the Ribbon Development in Sydney’s Darling Harbour has been the largest single transaction this year, followed by the $237 million purchase of the Novotel on Collins Hotel in Melbourne.

“Australia received 7.2 million international visitors (up 10 percent, or 680,000) and 248 million international visitor nights (up 5.0 percent) for the year ending June 2016,” said Mr Moors.

“Thirteen of Australia’s top 20 markets had record visitor numbers during the year. The holiday and education segments underpinned this strong growth.

“Interestingly, nights spent in hotels, motels and resorts increased by 9% to 27.5 million on the back of strong growth in the holiday segment.

“The opening of the International Convention Centre at the end of 2016 will also undoubtedly have a positive impact on the hotels in Sydney with major conventions already confirmed, including the Amway China Leadership seminar in 2017 with 10,000 delegates and the SIBOS conference in 2018 with 6,000 delegates.”

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