TAA research challenges views on hotel supply
Sydney’s need for more hotel rooms is significantly lower than previously thought, according to new economic research from Tourism Accommodation Australia.
TAA commissioned AEC Group to produce the first extensive economic modelling of the Sydney accommodation market, incorporating price and return on inve
stment, in a bid to stop the city’s boom-bust accommodation cycle.
“This report should change the way governments across Australia think about the accommodation sector”, said TAA Managing Director Rodger Powell.
“Based on current projections of domestic and international visitation growth of 1.8% per annum to 2020, supply increases of around 500 rooms per year over this period will be sufficient to meet demand while maintaining industry sustainability.
“This is at odds with recent estimates that as many as 1800 rooms per year should be added to the market.
“We need to break the cycle of boom and bust in the Sydney accommodation market. The significant additions of rooms in the late 1980s and in the lead up to the 2000 Olympics resulted in room gluts which impacted industry revenues for years afterwards. Investor confidence was destroyed and a large number of these rooms were converted to residential apartments, with investors not returning to the market.
“The issues facing Sydney are the same as those currently facing Brisbane and Perth with their accommodation shortages, while Melbourne and Adelaide are only a few years away from reaching a similar situation. All our major cities should adopt a balanced but determined strategy of managing supply and demand in the accommodation sector.
“Melbourne and Singapore are examples of hotel markets that are successful due to a balanced government approach to marketing and events as well as encouraging investment.
“It is not enough to simply build infrastructure and hope the tourists will come. Demand must increase to justify additional investment. Sydney could lose $189 million in annual investment or $1.7 billion by 2020 unless the right balance is found between encouraging investment and growing demand.
