Australia hotel market improves in cities, but regional destinations struggle

AUSTRALIA Key demand drivers to Australia’s tourism, hospitality and leisure sectors have softened in recent months, due primarily to the surging Australian dollar amid a climate of uncertainty, with anticipated higher interest rates on the one hand and a continued national swing to savings on the other.

Stagnant numbers of tourists are arriving in Australia, combined with more Australians taking advantage of the surging Australian dollar by traveling abroad, according to a new market report from Deloitte. Nevertheless, key city markets throughout Australia continue to record improvements in performance primarily due to an absence of new supply and significant increases in corporate demand.

The longer the Australian dollar remains above parity to its U.S. cousin, the harder it will be for tourism and international education— two key sectors that dominate Australia’s service export earnings, says Rutger Smits, leader for Deloitte’s tourism, hospitality and leisure consultancy in Australia.

“The two-speed economy has influenced growth in the Australian hotel market in contrasting ways: strong growth in corporate demand tied to the resources sector and improvements to the business environment following the global economic downturn in recent years has allowed for continued growth in hotel occupancy and rate in these markets,” Smits says. “With no significant supply increases announced for the foreseeable future, there is large investment potential in several key locations within Australia—Sydney in particular. Until new developments go ahead there will be a lot of opportunities in Australia.”

Overall, occupancy throughout Australia is forecasted to remain relatively constant for 2011, while ADR is anticipated to grow by 5.2% to A$146, resulting RevPAR estimated to increase by 4.9% to A$93.

Looking ahead to 2012, Deloitte predicts occupancy growth throughout Australia to remain marginal, increasing by a further 0.5% to 64%. In the absence of supply growth, ADR is set to increase a further 6.5% to A$156, increasing RevPAR by 7.3% to A$100 nationwide.

To see the full Deloitte Tourism, Hospitality and Leisure: Market Outlook Q2/2011 report, with details on capital city markets and selected regional destinations, click here.