The expansion of Australia’s accommodation market has continued over the past two years with the addition of more than 8,500 rooms in the ten major accommodation markets through 2020 and 2021.

Colliers’ Australian Accommodation Supply Update November 2021 reveals that accommodation room supply increased by 4,924 rooms across the ten major markets in 2021, with Melbourne seeing the most significant increase as 2,339 rooms opened in the city and 588 across the broader metropolitan area.

New hotels are set to benefit from pent up demand for domestic leisure travel heading into 2022 with the re-opening of state borders across the country. As people become more comfortable, a return to domestic corporate travel later in the year will also provide a welcome boost. On top of this, high vaccination rates and an effective response to the pandemic are also expected to make the nation an attractive destination for international travel as more travel bubbles are established throughout the year.

“As the events capital of Australia, Melbourne had one of the fastest growing tourism markets pre-COVID, which coupled with an availability of land, had led more investors to consider developing new hotels in the Melbourne CBD and across the broader metropolitan area,” Colliers National Director Hotels Karen Wales said.

While new hotel openings have continued through 2021, an increase in new rooms over the next 12 months should mark the national development cycle peak. Close to 6,850 room are scheduled to open nationally during 2022, according to Colliers’ research. New openings are set to peak in the second half of the year, particularly in Sydney and Melbourne.

“Sydney and Melbourne have both seen a regeneration of hotel room stock with new hotels opening across different chain scales, product styles and brands. As Australians start travelling domestically again and international visitors return to our shores, they will be able to enjoy these fantastic new hotels,” Ms Wales said. “The Gold Coast will also see some significant new openings including Meriton Surfers Paradise, Dorsett Gold Coast, The Langham Gold Coast and in the future, Mondrian. These assets are well timed to take advantage of growth in domestic leisure tourism through 2022.”

Heading into the future, the pipeline is set to dry up in 2023 (3,022) and 2024 (1,234), with proposed projects predominately those where the operator has been announced and Hotel Management Agreement already signed. Two years of intermittent lockdowns and closed state borders through the pandemic is expected to slow down the expansionary phase of the hotel market cycle as investors wait for demand to catch up with supply.

The data also reveals the predicted development hotspots for 2023, with Melbourne Centre (776 rooms) leading the way, followed by Perth (441 rooms), Brisbane (359 rooms), Melbourne Metro (306 rooms), Sydney Metro (301 rooms), Sydney Centre (297 rooms), Gold Coast (212 rooms) and Canberra (207 rooms).

“The slowdown in openings will allow demand to catch up with supply and older room stock is likely to be sold for conversion to an alternate use,” Ms Wales said. “New additions to accommodation supply are set to peak in Melbourne in 2021, while openings in Sydney will peak in 2022 given that all proposed projects may not proceed.”

Another major impact of the pandemic was on the supply of short-term rental accommodation, with levels remaining low compared to pre-covid. After a dramatic drop through 2020, active rentals steadied through 2021 as travel demand was still constrained.

“In the absence of any significant tourism demand, short-term rental supply has retreated to the long-stay rental market. This is welcome news for city hoteliers who have invested significant capital into building and marketing new hotels. This will act as a significant draw as tourism and travel markets recover,” Ms Wales added.

Key points below:

• New data from Colliers shows room supply increased by 4,924 rooms across the ten major markets in 2021, with Melbourne seeing the most significant increase as 2,339 rooms opened in the city and 588 across the broader metropolitan area.
• While new hotel openings have continued through 2021, an increase in new rooms over the next 12 months should mark the national development cycle peak. Close to 6,850 room are scheduled to open nationally during 2022.
• The data also reveals the predicted development hotspots for 2023, with Melbourne Centre (776 rooms) leading the way.
• New hotels are set to benefit from pent up demand for domestic leisure travel heading into 2022 with the re-opening of state borders across the country.

To request further Information on the Colliers’ Australian Accommodation Supply Update November 2021 please contact Colliers National Director Hotels Karen Wales via the below contact details.