Australia’s accommodation industry has undoubtedly been one of the hardest hit sectors due to the impacts of the travel restrictions in place to curb the spread of COVID -19. As a result, some owners have made the difficult decision to close hotels temporarily as they have sought to navigate the low demand environment across Australia and with the mandatory closure of licensed premises within hotel operations.
According to STR, occupancy levels fell sharply through March before reaching a low point in April ranging between 29% in Melbourne to 7.7% on the Gold Coast. It is worth noting however that occupancy levels reflect what operators are reporting as “available inventory”, and given the discrepancy as to how to report closed inventory, the actual market occupancies are lower when considering “normalised” supply.
As we move towards recovery with the reopening of borders and as Australians start travelling again, it will be important for owners and operators to understand where and to what extent temporary closures have occurred as this will have a material impact on performance during the second half of the year, particularly when coinciding with the opening of more new hotels.
Australia’s hotel development cycle has been in full swing over the past couple of years with more than 15,000 rooms still under construction. Completion of these rooms will add downward pressure on hotel markets as these hotels open and look to gain share.
Temporary closures of existing inventory
Research undertaken by Colliers in mid-April 2020 (of over 700 properties with 100,000 rooms) found that close to 30% of hotel rooms across Australia were temporarily closed or placed into ‘hibernation’ with other hotels operating with limited inventory. Some hotels which remained open were not taking bookings but being used for government mandatory quarantine purposes.
Even where hotels have closed, there would be an ongoing staffing requirement to ensure the safety and security of the building is maintained, which has resulted in owners keeping the doors open. The introduction of the Federal Government’s JobKeeper program has also tipped the balance in favour of staying open albeit with staff often engaged in cleaning and refurbishment works to make up their hours.
Hotels which have temporarily closed are expected to start to reopen once interstate borders reopen and travel is once again permitted across Australia and demand starts picking up. Our research indicates that most properties which did choose to close temporarily are not projected to open until the end of June at the earliest.
Wide variance between major centres
New hotels opening in 2020 will add further downward pressure
Closed state borders continue to hamper greater travel
Source: Colliers International, as at June 2020
Intrastate tourism marketing can only go some way
National Director, Transaction Services | Hotels Asia Pacific
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.
Analyst | Hotels
I have over 13 years experience in tourism, accommodation and consulting. I have worked at the Tourism & Transport Forum (TTF) as a Tourism Policy Manager focussing on the accommodation sector. Prior to joining TTF I worked in the London and Sydney offices of Cushman & Wakefield Hospitality as a Senior Hotel Consultant.
'Charting the Course' series
Colliers International Hotels team have put together a series of articles to help the hotel and tourism industry chart the course to recovery, as one of the sectors most acutely impacted by social distancing measures introduced in response to Covid-19.
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