In producing Hotel Futures 2017, investors now have available to them forecasts of key demand drivers, published by Tourism Research Australia (TRA), and a number of other government and private sources. Supply information is provided by local and state governments as well as private organisations. Hotel Futures seeks to interpret the impact of these expectations on hotel revenues, when combined together in a supply/demand equation. 

Hotel Futures 2017 Snapshot

In FY2016 the Australian Capital City Hotel markets recorded 3.7% revenue growth (RevPAR) which exceeded our 1.3% expectations. Occupancy tightened to unprecedented levels, reaching 78%, enabling rate outperformance.

RevPAR

The long term revenue forecast for Australian Capital City hotels is for strong RevPAR growth averaging 4.4% p.a, underpinned by extremely high occupancy levels despite moderate additional supply which continues to be outpaced by demand growth.

• The forecast is consistent with prior expectations with slightly increased supply expectations offset by increased demand and affecting hotelier confidence to claim rate growth. Long term growth rates are largely unchanged.
• Long term growth expected for all cities, although peak and trough periods have varied by city despite the national average remaining consistent with prior expectations.

Supply

Hotel Futures’ 2017 sees a small increase in absolute supply of 2,300 rooms to FY2024 (0.2% p.a.) which is consistent with growth in demand drivers. Average growth of 3.4% p.a expected.

• Construction activity has almost doubled as previously proposed projects break ground. New mooted development has continued and has been comfortably absorbed into previously forecast Market Response.
• Delays in delivery have eventuated over the next 3 years, however are likely to catchup over the long term.

Demand

Hotel Futures’ 2017 long term demand forecast is for strong average annual growth of 3.9% to FY2025, which is above prior expectations, enabled by improved tourism visitor night forecasts and additional supply.

• Tourism Research Australia’s long term visitor night forecast to FY2025 has been slightly upgraded. Average annual growth of 4.0% p.a. is expected compared to 3.6% in the prior forecast.
• Improved expectations to both Domestic and International visitor nights as International nights close the gap to Domestic market share.

Average Room Rate (ARR)

Robust long term rate growth expectations averaging 3.8% p.a are expected as occupancy levels hold above 77% for the life of the forecast.

• Improved average occupancy levels are expected following outperformance in FY2016. The supply pipeline upgrade is expected to negatively affect rate growth as hoteliers take a cautious approach to retaining and growing occupancy despite an even higher demand growth outlook.
• Rate impacted by volatile confidence levels despite very good supply and demand fundamentals.
• Upside opportunity remains in many cities, particularly if the large Market Response allowances do not eventuate as quickly as expected, boosting confidence levels.

Click here to view the full Hotel Futures 2017 report.

Dransfield is a specialist professional services organisation advising the tourism, finance and property industries.

Their experience includes a wide range of property and business related projects involving over 65,000 hotel rooms and numerous food and beverage outlets in more than 600 hospitality enterprises throughout Australia and Asia.

For further information on the range of services Dransfield provides, click here to visit their website.

See also:

Colliers International release New Zealand Hotel Market Snapshot May 2017

Savills release Australia’s Hotels market report March 2017