Brisbane hotel sector recovering as occupancy hits 77%

Brisbane’s hotels and resorts sector has mounted a strong recovery in the first quarter of 2011, according to the latest ABS tourist accommodation figures.

Since the start of the year, occupancy rates have risen from 60% in January, just after the floods, to reach 77% by the end of March 2011, official figures show.

Guest arrivals have increased from 61,000 recorded in January to 72,500 in March, while over the same period average takings per room per night have gone from $163 to more than $200.

Brisbane’s hotel sector has been boosted by the strong increase in the number of business visitors coming to Australia, according to CB Richard Ellis analyst Craig Godber.

Conversely, the Gold Coast market, which is more heavily reliant on leisure travellers, is heading in the opposite direction.

Since the start of the year, the occupancy rate at Gold Coast resorts and hotels has fallen from a healthy 75% in January 2011 to just over 60% in March 2011.

The Gold Coast occupancy rate for the March quarter of 2010 stood at 73%.

Godber expects Queensland’s leisure-focused markets to remain subdued in the short term, though investors have shown faith in the long-term health of the market, with major transactions totalling $265 million in 2010.

The strong demand for accommodation from Brisbane visitors comes as investor activity and interest picks up this year.

Jones Lang LaSalle has identified Brisbane as a hotel development hotspot, with the market accounting for 18% of rooms under construction across the 10 major markets.

According to its Australian Hotel Development Register for June, there are 362 hotel rooms currently under construction in Brisbane and 521 on the Gold Coast, compared with just over 432 in Sydney.

Hotels under construction include the 4.5-star Mosaic Grand Chifley Hotel on the corner of East, Church and Ann streets in Fortitude Valley due for completion in 2013, which will comprise 48 rooms and is being built by Leighton Holdings at a cost of $150 million.

CBRE Hotels senior director for Queensland Wayne Bunz says the strength of the Brisbane market is spurring strong demand from hotel investors and could push forward major development projects.

Bunz says hotels have recorded strong occupancy rate growth during the first five months of this year, even after the Stamford Hotel reopened its doors, adding 252 rooms back into the market.

“In this environment, attention is focusing on a number of possible additions for the [Brisbane] CBD, including a 400-room hotel on the ex-State Library site on George Street, a 231-room development at 99-103 Mary Street, a 316-room hotel at 40 Elizabeth Street and the conversion of 171 George Street and the office space at The Chifley at Lennons Hotel,” Bunz says.

“Funding, however, remains the biggest impediment to new development, with significant equity levels still required,” he says.

The decline in the Gold Coast market has corresponded with other coastal Queensland hotel markets heading south.

For the March 2011 quarter, occupancies are down to 39% on the Fraser Coast and 42% on the Whitsundays, compared with 49% a year ago.

However, not all coastal areas are struggling to fill their hotel rooms, with Mackay occupancies rising from 54% to 61% over the first three months of the year.