Hotel trading fundamentals remain strong nationally
2015, a year of significant growth
Australian hotels finished 2015 on a high with full year STR data showing record occupancies and average daily rates (ADR) across the majority of major markets.
Key drivers for this growth included common internal and external influences such as limited new supply pipelines, the depreciation of the Australian dollar, increased air capacity and greater confidence amongst the corporate and MICE segments.
Demonstrating strong growth trends that are expected to continue into 2016, December trading saw significant performance from almost all of Australia's major accommodation markets. Most notably, RevPAR (revenue per available room) gains were evident in the Sydney five-star (14.9%), Sydney (12.7%), Hobart (11.3%), Melbourne (10.6%), Gold Coast (10.4%), Melbourne five-star (8.9%) and Cairns (6.7%) markets.
In Sydney, occupancy increased marginally on existing highs to 88.2% for the full year, while ADR increased by 6.6% to $243. The five-star market followed similar growth trends with ADR now nearing $300.
Craig Collins, Chief Executive Officer - Australasia, JLL Hotels & Hospitality Group, said, "Strong RevPAR growth, led by increases in ADR, is expected to continue over the coming years stemming from Sydney's high occupancy base.
Sydney's metropolitan sub markets had a stellar year with Ryde, the Airport precinct and Parramatta all recording strong RevPAR gains. A function of reduced supply, Ryde had the largest RevPAR gain out of the three markets at 16% to finish the year at $134. The stand-out performer was however the Airport precinct with RevPAR growth of 10.3% to $140 – a figure that's now above a number of capital city markets.
Peter Harper, Senior Vice President, JLL Hotels & Hospitality Group, suggested "With continued gentrification and densification within mascot and strong growth forecast for visitor arrivals for Sydney Airport, the precinct is expected to continue to show strong performance in years to come.
"The Sydney metropolitan markets are key beneficiaries of overflow from the CBD but ultimately will continue to grow and perform within the surrounds of their respective submarkets."
Melbourne's hotel trading market continued to perform exceptionally well finishing 2015 with an occupancy rate of 86.5% and ADR of $205, representing RevPAR growth of 5.2%. The five-star segment followed a similar trend and still commands a significant ADR premium.
Mr Collins said, "Melbourne's reputation for its formidable sporting, cultural and events offering, combined with a strong corporate and conferencing market continues to benefit the cities highly resilient and strong accommodation market."
The Gold Coast remains on an upwards trend in terms of occupancy and ADR, combining for RevPAR growth of 8.0% to $128. The established leisure destination continues to benefit from the growing popularity amongst Asian markets, encouraged by increased air capacity, the moderation of the Australian dollar and better quality product following several hotels undertaking major renovations.
Looking further north, TNQ and in particular Cairns, have long been a core leisure destination for Australia. The Cairns leisure market continues to trend upwards with greater inbound and domestic demand resulting in occupancy growth of 6.9%, which with a 2.3% increase in ADR saw RevPAR increase 9.3% to $137.
"As with the Gold Coast, the increased direct air routes between the Cairns and Asian markets, along with the weaker Australian dollar, make this market a more and more favourable destination amongst inbound Asian travellers." said Mr Harper.
Another major market to experience strong gains in 2015 was Hobart, the result of a greater focus of international and domestic travellers, together with an improving calendar of major events such as Dark Mofo. RevPAR was up 10.1%, a function of similar increases in both occupancy and rate.
Despite earlier concerns regarding the impact of the downturn in resources industry on Perth's hotel market, the West Australian capital has weathered well finishing 2015 with its ADR remaining one of the strongest in the country at $204 and less than a 1% drop in occupancy.
Canberra's trading market showed a strong recovery in occupancy to see RevPAR grow 6.6% to $127. It is clear that this market has witnessed the end of a multi-faceted downturn with anecdotal evidence suggesting demand increases across most segments, which should in-turn allow hoteliers to drive rate in the short to medium term.
The strong performance of many of the major hotel trading markets across 2015 is expected to be largely echoed in 2016 with a multitude of positive macroeconomic and local factors playing a key role.
Source: Jones Lang LaSalle - 8th February 2016
