Jump in overseas trips bad news for regional hotels
Regional tourist accommodation providers are likely to feel more pain as record numbers of Australians take advantage of the strong Australian dollar to head overseas rather than holiday locally.
According to ABS Overseas Arrivals and Departures data for June, Australians took 7.44 million overseas trips in the 2010-11 financial year (up 9.9% on 2009-10), compared with 5.91 million international visitors to Australia (up 3.8% on 2009-10).
For the first time overseas trips taken by Australians outnumbered international arrivals by more than 1.5 million. The number of Australians heading overseas first exceeded arrivals in June 2008.
Over the June quarter arrival numbers declined by 0.5% to be up just 0.5% on a year ago, below average annual growth of 1% over the last six years.
Furthermore, visitors are spending less when they are here, with Westpac forecasting total travel export volumes for the second quarter are likely to be down 5% on a year ago.
The flat overall growth in visitor numbers has had less of an impact on CBD hotels, where occupancy rates remain strong as the sector is far more reliant on business travellers.
According to the Tourist and Transport Forum, business visitor numbers rose by an impressive 11.3% over the March quarter while holidaymaker numbers – the bread and butter of regional hotels – declined by 5.3%.
As a consequence while CBD hotel occupancy rate and room takings have remain robust due to strong business demand, regional hotels, motels and guest houses have headed in the opposite direction.
This two-speed nature of tourist accommodation was starkly revealed in the June quarter ABS figures, complemented by research by STR Global that revealed occupancy rates were significantly higher for CDB hotels (77%) compared with non-CBD hotels (68%) over this period.
According to STR Global, demand for business accommodation was particurlarly prevalent in Perth, with room rates rising 9.6% in the first six months of the year, followed by 8.1% in Brisbane and 8.4% in Sydney.
The outlook for 2012 looks a little brighter for regional providers.
While it remains to be seen if the recent correction in the Australian dollar will be sustained, the Tourist and Transport Forum is forecasting 5.1% growth in holiday visitors in 2012, nearly double the growth of 2.6% achieve in 2011.
In addition, visitors are expected to stay an average of four nights in 2012, compared to 2.9 in 2011.
However, the 300 property market participants who took part in the NAB June quarter commercial survey see little change over the next two years.
They forecast the capital values of CBD hotels are tipped to rise by a healthy 5.3% over the next 12 months and by 6.2% over the next two years.
In comparison, hotel property values outside of the CBD are expected to stagnate over the next year (declining 0.2%) and to rise by just 1.6% over the next two years.