The green shoots of recovery for Australian hotels

The pace of change for the Australian hotel and tourism sector as a result of COVID-19 was unlike anything that had been seen before, resulting in a sharp decline in trading during the first four months of 2020.

Colliers International analysis of STR Global figures found that performance declines in Australia have been largely due to the contraction in demand with occupancy declines in April, ranging between -14.6% in Perth to -39.5% on the Gold Coast, when comparing the month-on-month 3M rolling average.

Markets such as Sydney and Melbourne have been more significantly impacted however by a fall in Room Rates with replacement quarantine business charged at a significantly discounted room rate when compared to the first quarter average

Karen Wales, Director, Hotels at Colliers International believes that Australia’s tourism industry has the potential to rebound strongly from COVID-19, due to ‘revenge spending’.

“Revenge spending is a term which was coined to describe pent-up Chinese consumer demand in the 1980s that was unleashed after the chaos and poverty of the Cultural Revolution.

“The anticipation of revenge travel over the next 6 months to the end of the year prior to the opening up of international borders

“Fast-forward to today’s unique situation and every Australian who’s been stuck in isolation has probably quaran-dreamed about the places they’ll go, when we can finally leave our houses.

“With many investors expecting the domestic leisure segment to lead the recovery, hoteliers are hoping for a swift turnaround when we finally elbow bump goodbye to the coronavirus.”

“NSW and Victoria expected to lead the recovery  given border restrictions in other states and being the largest  intrastate holiday markets, representing nearly 60% of Australian hotel stays in 2019.”

“Queensland and Western Australia have the potential to benefit most from revenge spending as they are the biggest beneficiaries of net importation of domestic tourism.  The continued closure of these state borders has the potential to weigh heavily on the state tourism industries given their net importer status.”

In the meantime, Colliers maintains there are several steps that hotel owners and operators should have already implemented in regards to the demand shock.

“By now each hotel owner, in collaboration with their operator, should have stepped through every market segment and contacted every account within each segment to determine what if any room night demand exists,” said Gus Moors, Head of Hotels at Colliers International.

“If those accounts have indicated ongoing demand, you should have determined their stay patterns as well as their food and beverage requirements whilst at the hotel. Owners and operators should also have explored new revenue opportunities, particularly from government channels.”

“Having honestly assessed the likely income expected over the past two months and the coming three months, the next step you should have undertaken is to restructure the cost base to match that revenue outlook.

Nigel Greenaway, National Director, Hotels at Colliers International, said that cost assessment is another key component that both parties need to consider.

“Collaboration between owners and operators has never been more vital, and owners have for the first time been involved in the granular assessment of each expense line.”

As the largest expense, payroll has drawn the greatest attention, and this has been the over-riding focus in determining whether to remain open or not.”

“The conclusion we have drawn is that the fixed labour cost required to remain open is not that different to the skeletal staffing needed even when the hotel is closed. It is also important to retain the key management team that will enable you to ramp back up once the lockdown lifts.”

“Once completed, this combination of realistic revenue forecasting coupled with the granular expense review would have allowed you to understand your future cashflow outlook and you should therefore be able to understand if further equity injection is required and when.”

The outcome of this planning and the implementation of saving measures should lead owners to weather the low occupancy storm for 2020.

The industry is starting to show the green shoots of recovery. 

Colliers analysis of Site Minder booking data for May shows that Australia, along with New Zealand, is leading the global recovery in hotel bookings. The volume of hotel bookings in Australia has risen throughout the month to be at one third of the level recorded in 2019 as at Saturday 23rd May.

Karen Wales said “The biggest spike in Australian hotel bookings in May was for Canberra, up from 15.07% of 2019 levels at the start of the month to 32.76% by Saturday 23rd May and representing a very strong trajectory.  Similarly, Gold Coast and Adelaide both experienced a doubling in hotel bookings over the month.  Perth continues to outperform, but Sydney also showed impressive pick up over the past week, far outpacing the growth in Melbourne and Brisbane.“

“Owners and Operators will need to carefully monitor future bookings, whilst maintaining tight control of costs as the recovery gains pace” added Nigel Greenaway. 

Click here to read more articles by the Colliers Hotels team.


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Gus Moors

Head of Hotels | Australia

Sydney CBD

Having joined Colliers in early 2014, I have subsequently sold over $180 million of hotel assets across Victoria and NSW, including the largest hotel transaction in Victoria since 2008, being Bell City Preston for $143 million.

Prior to joining Colliers, I was Director of Asset Management for Tourism Asset Holdings Limited (TAHL), Australia's largest hotel owner and responsible for selling down this portfolio totalling over $1.5 billion.

Before TAHL, I was with Jones Lang LaSalle Hotels for 7 years, as Head of Asset Management and Chief Operating Officer for the Hotels group across Asia Pacific.

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Karen Wales

Director |Transaction Services, Hotels Asia Pacific

Sydney CBD

Karen has over twenty years of experience in the hotel industry and holds a Masters of Business Administration (MBA) from the Australian Graduate School of Management. She brings with her a specialised knowledge of the Asia Pacific hotel investment market and an ability to drive fresh capital into Australia’s hotel markets. She has developed an exceptional network over the past two years across Asia and the Middle East and within government, in her capacity as Senior Investment Specialist Tourism Infrastructure at Austrade and her knowledge of new entrants into the growing Australian tourism sector is second to none.      

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Nigel Greenaway

National Director | Hotel

Sydney CBD

For over 27 years, Nigel’s career in the hotel industry has spanned hotel operations and finance, working for leading hotel operators and more recently, heading two of Australia’s leading wholesale hotel investment funds.

Prior to joining Colliers, Nigel spent 10 years as the Fund Manager of Eureka Fund Managements First Core Fund. The fund comprised hotel investment in branded hotels such as InterContinental, Four Seasons, Crowne Plaza and Holiday Inn. He led the fund team in establishing an investment in over $1.0bn of hotels in Australia and New Zealand. Nigel was responsible for the entire fund strategy of acquisition, repositioning, asset management, equity and debt capital strategies and exit strategy.

Nigel commenced the hotel investment stage of his career with Colonial First State Property as an Asset Manager for the portfolio of Marriott hotels in Australia before taking the funds lead role as Fund Manager.

In the early part of Nigel’s career, he held a number of Finance Director roles for Southern Pacific Hotels Corporation (now IHG) in Australia and the Pacific. After a period, as Regional Director of Finance for the Northern half of Australia he established his own hotel finance consulting group which provided accounting and financial related services to hotel operators and owners in Australia, New Zealand, Vanuatu and Fiji.

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