Dransfield's latest Hotel Futures 2018 report has found that in FY2017 the Australian Major Cities Hotel markets recorded 2.1% revenue growth (RevPAR) which was slightly below our 2.6% expectations, however positive growth nonetheless.

The report continued to find that occupancy levels increased despite material supply additions, providing a basis for moderate rate growth RevPAR.

"The long term revenue forecast for Australian Major City hotels is for healthy RevPAR growth averaging 4.0% p.a, underpinned by high occupancy levels, and a positive supply and demand equation."

• The forecast remains strong, however, represents a slight downgrade to prior expectations of 4.4% p.a. with increased supply outweighing increased demand, with slightly less upward pressure on rate
• Long term growth is expected for all cities, although market cycles differ city to city Supply

"Hotel Futures 2018 sees an increase in absolute supply of 3.7% to FY2025 (or a 0.4% increase p.a.) above our previous forecast. We anticipate the market will deliver 5,000 additional rooms above previous expectations, largely offset by increased demand expectations. Average supply growth of 3.9% p.a. to FY2026 is expected to be fully absorbed."

• Supply uplift is largely in Sydney and Melbourne, and amounts to almost 60% of the total increase. Demand expectations have also increased in these key markets
• Construction activity increased by 45% from last year, with 13,500 rooms now either recently completed or currently being built. Similarly, gross proposal activity has increased by 29%

Demand

"Hotel Futures 2018 long term demand forecast is for strong average annual growth of 4.1% to FY2026. This is above prior expectations, enabled by improved tourism visitor night forecasts and additional enabling supply."

Some key high level points from the report also include:

• Tourism Research Australia’s (TRA) long term visitor night forecast to FY2026 has been slightly upgraded. Average annual growth of 4.1% p.a. is expected compared to 3.9% at the time of the prior forecast
• TRA growth is driven by international nights, with a slight decline in domestic expectations Average Room Rate (ARR) Long term rate growth expectations averaging 3.7% p.a are expected, buoyed by very strong occupancy levels for the entirety of the forecast
• Our rate growth expectations have reduced slightly following increased supply expectations which will affect occupancy pressure, as well as discounting behaviour as an increased number of properties look to establish market share
• Upside opportunity remains in many cities, particularly if the large Market Response allowances in supply underpinning the forecasts do not eventuate as quickly as expected.

Click here to view and download the full Hotel Futures 2018 report.

See also:

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Australian tourism ticking all of the boxes

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