Record hotel occupancy rates in Sydney and Melbourne set to push room prices higher

Sydney and Melbourne, in particular, are recording their highest room occupancy rates in more than two decades, with city hotels nearing capacity several nights a week and demand predicted to increase, says Deloitte Access Economics’ latest Tourism and Hotel Market Outlook report.

Overall, Australian hotel demand is set to more than double available supply over the next three years, a situation that will only push room prices higher.

“As the Australian economy transitions from a growth phase underpinned by resource sector construction to a more diversified one, travel patterns are gradually shifting away from the big mining states,” Deloitte Access Economics’ Lachlan Smirl said.

“At the same time, improved conditions for leisure travel — both inbound and domestic — are underwriting robust demand growth across several regions.

“These trends have been mirrored across our hotel markets, with Brisbane and Perth receding from their resource boom highs, and Sydney and Melbourne recording their highest occupancy rates in more than two decades.”

Sydney occupancy rates reached an average 86.5 per cent in 2013. Source: News Limited

Sydney occupancy rates reached an average 86.5 per cent in 2013, with Melbourne topping 90 per cent during November’s Melbourne Cup Carnival.

Nationally, average occupancy rates reached 66.8 per cent for the year and are expected to climb to 68.9 per cent by the end of 2016 on the back of a 4.3 per cent increase in international visitors.

“It’s been some time since conditions have been this favourable for Australian tourism,” Mr Smirl said.

“There are genuine signs of economic recovery in the US and Europe coupled with sustained strength throughout emerging Asia and a currency that’s fallen from its highs and is expected to depreciate further over coming years.”

This will see a corresponding jump in room prices, with the cost to customers forecast to continue to grow at 3.4 per cent per year to December 2016

However, the situation will vary around the country, Deloitte Access Economics says.

In Sydney, where growth in international visitors is expected to remain robust, room rates are forecast to grow 4 per cent to December 2016, to an average $228.

Despite softening domestic corporate travel, in Perth the residual strength of the mining sector will see room rates grow an average 4.6 per cent, to an average $220.

Canberra, by contrast, is experiencing stagnating demand for short-stay accommodation as the Federal Government tightens its belt, and will see only 2.8 per cent growth to an average $174.

‎Tourism and Transport Forum chief executive Ken Morrison said the results showed “an industry in a growth mode”.

He said more accommodation was being built to cope with demand and that major city hotel prices remained “a lot lower” than their overseas counterparts.

Source:  Herald Sun - 27 February 2014