Domestic and Chinese visitors drive improvement in Gold Coast and Far North Queensland hotel markets as mining capitals slip: Deloitte

The struggling hotel and leisure markets of the Gold Coast and tropical north Queensland appear to be reviving driven by rising domestic and Chinese visitors as the mining capitals of Perth and Brisbane retreat in the wake of fewer business travellers.

Melbourne's hotel market has lifted strongly due to a rise in domestic visitors and the closure of a major hotel while Sydney occupancy rates remained at high levels with room rates rising, according to the latest Deloitte Access Economics Tourism and Outlook report.

The recovery on the Gold Coast is being driven by a pick-up in domestic holidaymakers while in tropical north Queensland a preference among Chinese holidaymakers for smaller cities and regional destinations is driving a pick-up in overseas visitors.

Deloitte reports that since 2008, the Chinse share of visitor nights in Sydney and Melbourne has fallen from 73.1% to 62.8%, with the share of visitor nights in Brisbane, other capital cities and other regional destinations growing by 4.8%, 2.5% and 3.1%, respectively.

Occupancy rates on the Gold Coast have grown strongly over the past 18 months, “reflecting a surge in domestic holiday visitors” says Deloitte Access Economics’ Lachlan Smirl.

Gold Coast occupancy rates for the year to March 2013 reached 71%, a 4% increase to March 2012.

“Demand for accommodation is highly seasonal on the Gold Coast and while occupancy rates fell in April and May they were broadly on par with last year, averaging 71.1% over the year to May,” Smirl.

Deloitte projects that occupancy rates will continue to grow through 2013 and then stabilise at around 72% by the end of 2015.

“In contrast to occupancy rates, and reflecting the significant capacity that remains in the market, room rates on the Gold Coast have grown relatively slowly over the past two years.

“Consistent with recent trends, room rate growth is projected to average 3.5% per annum over the three years to December 2015, while continued growth in occupancies is forecast to see revenue per available room (RevPAR) grow at an average rate of 4.5% p.a. over the same period,” he says.

International visitor nights on the tropical north Queensland market (places like Cairns and Port Douglas) grew by over 20% over the year to March with the occupancy rate reaching 61.2% in the year to March.

“As with the Gold Coast, occupancy rates in tropical north Queensland are highly seasonal but fell slightly in April and May relative to last year, with occupancy rates averaging 60.9% over the year to May 2013," says Smirl.

Deloitte forecasts continued growth in occupancy rates in tropical north Queensland, with average occupancies projected to increase to 65.6% by the year to December 2015, reflecting the expected growth in international visitor nights – Asian leisure travellers in particular – over the next three years.

“Room rates have been relatively steady over the past two years – with, like Gold Coast, a significant amount of capacity remaining in the market.

“Looking forward, however, room rates are forecast trend upwards, growing at an average annual rate of 4.2% per annum.

“The strong growth in occupancy rate and room rates mean that RevPAR is expected to grow at an average annual rate of 7% over the three years to December 2015,” says Smirl.

Nationally, the accommodation market remained broadly on par with its 2012 performance, with occupancy rates averaging 66.0% for the year to May and room rates growing 2.6% per annum.

“While the national picture is a relatively stable one, there has been a significant divergence in performance across the country’s accommodation markets, with notable declines in Brisbane and Perth," says Smirl.

Both suffered from falling demand from domestic business visitors.

“The decline in visitor nights by corporate travellers over the last year has seen occupancy rates soften in the Brisbane market,” says Smirl.

“After sustaining an average rate of 81% over the year to March 2012, average occupancies eased to 79.3% over the year to March 2013 and have softened marginally further since, edging below 79% over the year to May.

“As a result of the forecast increase in supply over the next two years and the recent softening in business travel, occupancy rates for Brisbane are expected to remain relatively stable over the next two years, reaching 80.1% in the year to December 2015.

“This outlook is a downward revision on our first quarter release, reflecting the weakening corporate travel and a strengthening supply outlook.

In Perth, occupancy rates for the year to March 2013 fall to 83.8%, the lowest level since the year to June 2011.

“As the resource-related construction boom in Western Australia peaks, the demand for business travel to Perth will continue to soften,” says Smirl.

“Domestic business travel accounts for 30.6% of total visitor nights in paid accommodation in Perth, with international and domestic business travel combined accounting for 43.6% of visitor nights.”

Occupancy rates picked in Melbourne from 81% in the year to December 2012 to 81.9% over the year to May 2013 attributed in part to a strong increase in holiday visitor nights over the year to March as well as the closing of the Sebel Melbourne in February.

Deloitte forecasts Melbourne hotel occupancy rates to climb steadily to 84.1% by the end of December 2015 resulting in relatively healthy growth in room rates and yields.

The Sydney hotel market remains healthy with a steady outlook.

Deloitte reports that demand for accommodation in Sydney picked up marginally in the first five months of 2013, resulting in occupancy rates improving slightly to 84.8% over the year to May 2013 from the 84.7% recorded over the year to December 2012.

While occupancy rates in Sydney have been relatively flat, room rates have continued to grow steadily, improving 3.5% to $196 over the year to May 2013, while RevPAR grew 3.1% to $167 over the year to May.