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Australian Hotel industry undergoing major rejuvenation

Australia’s Hotel industry is undergoing a rejuvenation of room inventory in major markets on a scale not seen since the early 1990’s, according to the latest research from Colliers International Fresh New Look: Hotel sector gets a make over

New stock planned for many of Australia’s leading cities, will reinvigorate the hotel industry and provide travellers with a variety of new property styles and brands not previously seen on the Australian hotel landscape. 

“There are a range of new five star, boutique, lifestyle and luxury budget hotels planned across Australia’s major markets,” said Stephen Burt, Managing Director of Hotels, Asia Pacific for Colliers International.  “This is an exciting time for our industry because our room inventory has become too boring.

“We saw some great new product come into the market in the early 1990’s that was conceived in the late 80’s property boom, and Sydney also witnessed development of some high quality upscale hotels pre Olympic Games in 2000. However since then much of Australia’s accommodation inventory has been developer stock that typically has been strata titled. A lot of this stock will not likely make a long term sustainable contribution to the fabric of the Australian hotel market.”

According to Mr Burt, many of the major hotel operators have recognised the need to become more flexible in their offerings and provide a product influenced by local factors rather than the ‘one size fits all’ approach.

“In the past major international hotel operators have developed their brands around key offerings, and consequently their hotels in Melbourne have been identical to their hotels in Chicago, or Mumbai.  However, operators are now realising travellers are demanding a more local experience. 

“So while all the back-end systems will be the same, the hotel itself will be more sympathetic to its local environment, showcasing all of the local artwork, products, attractions and geographic features specific to the hotel’s location. These brands are allowing their hotels to express their own spirit. Examples include Accor’s Sofitel So brand, Marriott’s Autograph Collection, IHG’s Hotel Indigo and Starwood’s Aloft Hotels.

“Local players are also making their mark with the development of new clearly defined brands,” added Mr Burt. “Amalgamated Holdings with QT and Atura, Doma Group with Little National and APG’s Art Series.”

However, Mr Burt predicts there will be winners and losers in the rollout of the new brands and inventory. “The winners will clearly be hotel customers and the conference market as they will offer greater diversity of room product. The new upscale product is also critical for the industry overall as the average room rates escalate beyond the tepid growth experienced in the last twenty years, despite the strong market occupancies.

“The losers will be hotel owners that have not kept pace with the refurbishment cycle and hotels with brands that do not adequately differentiate what they stand for in an environment full of new robust brands.”

Mr Burt said the total returns from the hotel sector have outperformed other major commercial property sectors over the medium-term, having averaged 11.7 per cent over the past five years, compared with 9.5 per cent for industrial, 9.0 per cent for retail and 8.7 per cent for the office sector.

“With such strong returns from the sector, increased visitor numbers and a wave of capital coming into Australia to invest in this asset class, the time is right for the industry to reinvigorate. 

“This is a fantastic opportunity for the industry to undergo a transformation,” said Mr Burt.  “We haven’t seen anything like this since the 1990s, when many of the major hotel brands revamped their offerings.  What we are about to see in the hotel industry right now will be comparable to that period of major rejuvenation.” 

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