Perth heads strong capital city hotel outlook with business travel trending upwards: Deloitte
Capital city hotels will continue to appeal to both local and offshore institutional investors due to rising demand from both overseas Asian visitors and more Australians choosing to travel locally, according to the latest hotel outlook report from Deloitte Access Economics.
However, much of the strong pick-up in domestic travel is business related, with a negligible rise in the number of Australian travelling domestically for holidays over the past 12 months, meaning regional hotels and coastal resorts are set to continue to struggle.
According to Deloitte, nationwide occupancy rates reached 65.9% in the year to June 2012, up from 64.8% over the year prior, but occupancy rates are much higher for capital city hotel markets, where many overseas buyers have made acquisitions and launched new developments.
The research firm forecasts that growth in the average room rate of 3.7% per year will underpin average annual revenue per available room growth of 4.3% over the next three years.
Perth has strongest outlook and represents very strong demographics for investors with a current occupancy rate of 86% for the year to June 2012, suggesting very little spare capacity, especially during the week when business travel is at its peak.
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The opening of the 236-room Fraser Suites (pictured below) in October will help ease capacity constraints, and Deloitte forecasts occupancy rates to rise to 88.2% in the year to June 2015.
Mining-related construction activity, set to peak in 2014, will place added pressure on Perth room rates, which are forecast to increase by 10.3% per annum over the next three years.
Yields are forecast to grow by 11.3% per annum over the same period, rising from $165 in the year to June 2012 to $257 in the year to June 2015.
Sydney occupancy rates are forecast to rise from 85.4% currently to 87.7% in the year to June 2015, with revenue per available room (RevPAR) expected to grow by 4.5% over the next three years from $162 for the year to June 2012 to $185 for the year to June 2015.
Melbourne’s occupancy rate is expected to rise from 80.5% currently to 85.5%, with RevPAR forecast to grow by 6.2% per annum over the next three years, while Brisbane occupancy rates are forecast reach 81.9% by June 2015. Apart from the Mosaic Grand Chifley, opening next year, there is little in the supply pipeline. Brisbane room rates are forecast to grow by an average of 5.7% per annum over the next three years, while growth in yields is expected to be 6.2% per annum.
Deloitte forecasts international visitor arrivals to grow by an average of 4% per annum between now and June 2015 and international visitor nights to grow by an average of 4.3%.
The number of international visitors coming to Australia grew relatively modestly in the year to June 2012, but numbers are expected to pick up, with Deloitte forecasting above average growth.
“The headline growth in international arrivals continues to mask vast divergences across source markets, with China growing at double-digit pace while some traditional source markets (including Japan and the UK) contract.
“Over the next three years, more than 75% of the growth in international visitor nights will be from Asian travellers. Asia is, and remains, the key, and China continues to present a huge and long term opportunity,” says Deloitte Access Economics’ Lachlan Smirl.
"Local travel activity is also rebounding strongly, with domestic growth at their strongest in a decade,” he says.
“Domestic overnight trips increased by 5.8% for the year to June 2012, while domestic visitor nights grew by 6.7%,” Smirl says.
“Domestic visitation has now almost returned to pre-GFC levels and our forecast for growth in domestic visitor nights has been revised upwards, to an average of 1.3% per year over the next three years.
“This positive news is tempered slightly, however, by the mix of domestic travel type, with almost all of the growth in domestic visitor nights attributable to business travel and those visiting friends and relatives.
“Business visitor nights increased 9.2%, while friend and relative visits grew 13.8% in the year to June 2012. Domestic visitor nights by holiday travellers rose by just 0.4%, continuing the trend of sluggish growth in the domestic leisure segment.
“Looking forward, there are strong indications that the domestic tourism market is moving to a positive trend and, while the growth outlook is still moderate, the story is very much an encouraging one.”