Tourism surge drives biggest hotel building boom since the Olympics


February 12, 2019 06:10:13

Australia’s accommodation sector is seeing its biggest transformation since the Sydney Olympics.

Key points:

  • Tourism Accommodation Australia expects another 272 hotels to be built in Australia’s capitals over the next six years
  • That would add more than 45,000 new rooms
  • New air services agreements, meaning more flights to Australia, and a lower dollar are being credited for a tourism boom

While the construction rate for residential dwellings is falling, the hotel sector is in the middle of a rapid growth phase.

Tourism Accommodation Australia (TAA) said the reboot began three years ago, and more than 40 new hotels had been built across the country since then.

Its figures show another 272 new hotels are in the pipeline for completion by the middle of next decade.

Chief executive Carol Giuseppi said the rapid expansion came down to investor confidence.

“We’ve had good growth in demand,” she said.

“Low interest rates and the [Australian dollar] exchange rate mean there’s still potential there.”

New air agreements boost tourism

Ms Giuseppi said the Federal Government was paving the way for increased tourist arrivals from overseas, having negotiated more than 100 bilateral air services agreements.

The open skies agreement with China, signed in December 2016, allows Chinese airlines greater access to Australia.

“China has grown from 285,000 [airline] seats in 2005 to 1.5 million seats in 2018,” Ms Giuseppi told ABC News.

In June last year an air services agreement was signed with India — Australia’s fastest growing inbound tourism market according to ABS data — to open up direct services from the subcontinent.

Hotel construction suffered a slowdown after the peak ahead of the Sydney Olympics.

Just 3,000 hotel rooms were added in both Sydney and Melbourne each between 2000 and 2016.

TAA data shows a four- and five-fold increase on those numbers, respectively, by 2025.

Another 11,600 rooms are due to be added to the Sydney market and more than 15,000 more in Melbourne.

Home-style hotels the latest trend

The style of hotels has changed a lot since 2000 too.

The now popular “lifestyle” hotels are less cookie cutter and more home-style, with unique furnishings, less bulky furniture and common areas for guests to use.

Paramount House Hotel opened its doors in Sydney’s Surry Hills in April last year.

The 29-room hotel caters to visitors who want a community feel and to know more about where they’re staying.

Capturing the essence of the city was important for co-owner Russell Beard.

“If you’re travelling and you want to stay in a hotel you want to see a slice of that city. You don’t want to see something that’s generic,” he said.

He and his partners are new to the hotel game.

“It’s been really rewarding,” Mr Beard added.

“We are surprised that there is so much demand for the hotel so soon.”

The Hilton Group is also adapting its offering, with West Hotel, part of its Curio Collection range of hotels, opening in Sydney’s Barangaroo precinct in December 2017.

Hilton’s vice-president of operations Australasia, Heidi Kunkel, told ABC News that the 182-room hotel was one of a kind, “with designer touches, smart technology solutions and engaged, personal service”.

Ms Kunkel said the Curio Collection built on the concept of each hotel being unique to its location.

“The Collection brand was launched in 2014 to offer guests the chance to experience independent hotels while benefiting from the Hilton loyalty program,” she said.

Big plans don’t always eventuate

Sydney and Melbourne aren’t the only markets seeing growth.

TAA’s Innovation Revolution Transforming Australia’s Hotel Industry report shows the construction wave will see more than 45,000 new rooms added in Australia by 2025.

Gus Moors, Head of Hotels at Colliers International Australia, predicts that not all of those rooms will be built.

“A lot of those emerging projects that are possibly a few years out will fall away over the coming years,” he told ABC News.

He said there were two main reasons projects that were given the green light a couple of years ago were now less likely to come to fruition.

“Partially the market dynamics have changed and also the access to finance will have changed in that timeframe as well,” he explained.

Just take a look at Perth, where the property market timeline is ahead of the rest of Australia.

“During the mining boom it was one of the best hotel markets in the country,” said Mr Moors.

“So you had all the developers thinking, ‘I’m going to build a hotel in Perth’.”

“A lot of those projects were conceived in 2012, 2013, 2014, but then the mining boom fell over and the Perth hotel market changed quite dramatically.”

Now Perth has a much lower occupancy rate of about 78 per cent, and the average nightly price for a room has fallen from more than $200 at the peak to $170.

But Mr Moors added that hotels are still a solid investment and said he expected a large portion of the hotels mooted for the next decade to go ahead.

“Sydney and Melbourne, with an occupancy rate of 87-88 per cent year-round, are some of the highest occupancy rates in the world,” he said.

“As the residential markets close down, hotels provide good cashflow to investors.”








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