The low Australian dollar will continue to bring good news for the domestic tourism industry, with Australians rediscovering our own backyard as they take advantage of more affordable holiday options. The Australian hotel landscape is better positioned than ever to soak up this demand, with a tranche of new supply nationwide providing more diverse accommodation options in our top tourism destinations as well as new benchmarks in the luxury end of the market.

Queensland continues to be the jewel in Australia’s tourism crown, accounting for 22 of the 56 new hotels that opened nationally in 2018. Queensland now has some of the best luxury brands in Australia. In Brisbane, the luxury gap has been filled by a number of new openings this year – many of which represent true 5 star offerings not previously seen in Australia. This is clearly evidenced by new hotels in Brisbane, including the Calile Hotel, W Hotel, the Emporium and Ovolo The Valley.

See also: Ovolo The Valley hotel officially opens in Brisbane

Cairns’ hotel sector continues to gain momentum, with the far north tourism destination receiving its first new major hotel product in more than two decades in 2018. Testament to Cairns’ strengthening hotel industry is the current level of capital being injected into the area. This includes a $500 million investment from Dubai-based GA Group to open its five-star Crystalbrook Collection in Cairns – the Riley, the Bailey and the Flynn. The entry of five-star, luxury, boutique and lifestyle hotels in Cairns will raise the bar considerably and help to attract a new wave of travellers to the already popular tourism spot. With more options at this top end of the market, existing hotels in the area that haven’t refurbished or remained competitive, in terms of quality, service and rates, will experience challenges.

See also: The Westin Brisbane hotel opens its doors, featuring Brisbane’s first swim-up pool bar

The customer appetite for luxury product is here – people are willing to pay a premium as long as the service delivers. With more and more entrants in this top end of the market, Australia now has the product to meet this demand. The Whitsundays will be back on the luxury destination radar, with the reopening of Hayman Island and Daydream Island in 2019. Rebuilding these resorts after Cyclone Debbie in 2017 has been a silver lining, providing an opportunity for these operators to reinvest insurance money, substantially improve these resorts and truly captialise on a location that is regarded as one of the world’s greatest luxury destinations.

Locations with substantial oversupply in residential stock pose a threat to the hotel market given the potential for these to be tipped into the overnight letting pool or AIRBNB. There has been some evidence of this in Melbourne recently and common on the Gold Coast over the years. While we expect occupancy in Melbourne will be sustainable, there may be pressure on rates because of this. This will lead to an increase in buying opportunities in Melbourne over the next two – three years.

Sydney remains a tier one destination from a tourism point of view, with limited investment stock available. When opportunities do become available, competitive buyer tension drives prices to new highs – as evidenced by the sale of Little Albion this year, which achieved a record price per key. The market’s strength will see owners hold onto stock, with no major transactions on the horizon in the Sydney CBD for the next two – three years.

See also:

Leasehold interest in Airlie Beach Hotel sold

Howard Smith Wharves Art Series Hotel opening March 2019

World's first voco branded luxury hotel opens on the Gold Coast