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Australian hotel bookings increase as supply headwinds loom

Australia’s hotel booking volumes have increased throughout October, with strong growth predicted as we head into the peak summer season offsetting a slew of new rooms which are now anticipated to open over the next six months.

Colliers International’s Australian Hotel Markets Performance Dashboard found that according to Site Minder’s World Hotel Index the volume of hotel bookings in Australia increased through October to surpass the global average.

“As at the end of October, hotel bookings in Australia were at 60.3% of the level recorded in 2019, up from 57.7% at the end of September and just slightly below the June 2020 peak,” said Gus Moors, Head of Hotels at Colliers International.

“Fast-forward two weeks to mid-November and the volume of bookings is at a similar level to mid-March – just before mandatory quarantining for returning overseas travellers was imposed.”

However, the booking window remains very short, with most bookings made within two weeks of the stay. The exception is the Christmas and New Year period, which has a clear spike in bookings with many Australians mandated to take annual leave and a pent-up demand to travel.

“We expect this to continue to increase once Victorians can cross state borders and when Sydneysiders are permitted to travel to Queensland without quarantining,” said Karen Wales, National Director Hotels at Colliers International.   

“Hobart has recorded a significant spike in bookings since reopening this month with bookings currently at 86 per cent of the levels in 2019.  This indicates a strong peak season.”

Although the unfettered expansion of Australia’s accommodation market looked set to continue for some years to come, COVID-19 has brought an abrupt halt to the expansionary phase of the hotel market cycle.

Gus Moors, said, “Interruptions to global supply chains, lockdowns, closed international and state borders, the introduction of social distancing on construction sites and capital inertia have all impacted the delivery of new accommodation rooms.”

“Some owners have made the difficult decision to close hotels or delay opening when staring down the barrel of low room night demand.”

“Combined, these factors have caused a fundamental shift in Australia’s accommodation supply base and pose fundamental challenges to hotel market forecasting and budgeting.”

Whilst hotel openings have been pushed back through 2020, the next six months will see a spate of new rooms come online.  Colliers Australian Accommodation Supply Update report has identified that 5,004 rooms are now scheduled to open during Q4 2020 (2,540 rooms) and Q1 2021 (2,464 rooms) placing additional downward pressure on city hotel markets.

Karen Wales said, “Adelaide, Gold Coast and Sydney will each see a quantum of new rooms, but Melbourne tops the list with 2,011 new rooms due to open in the CBD and a further 712 rooms across the wider metropolitan over the next six months.”

“New openings are expected to moderate through the mid-part of 2021 before spiking up again at the end of the year, particularly in Sydney and Melbourne.”

“Offsetting this has been a significant reduction in Short Term Rental Accommodation (STRA). Sydney and Melbourne account for the lion’s share of reduced listings with 6,827 and 5,484 fewer active listings respectively in the CBD than when compared to the start of the year.”

“Much of this STRA stock has moved to the long stay rental market which can offer a greater certainty of income whilst representing a discount to pre-COVID nightly STRA room rates.”

Gus Moors said, “2021 now presents as the peak of the supply cycle with considerably fewer rooms under construction and scheduled to open in 2022 and 2023.”

“Whilst some city hotel markets will be challenged by new supply opening over the next few years, it will provide the culmination of the rejuvenation of the sector after decades of under-investment.”

“New openings will likely be offset by further closures, particularly older stock, which is no longer considered fit for purpose in a post-COVID world or those hotels whose business plans have fundamentally changed.”

Read Charting the Course here: https://www.colliers.com.au/en-AU/Services/Hotels/Charting-the-course


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Gus Moors

Head of Hotels | Australia

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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

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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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