DOWNLOAD THE CBD HOTEL MARKET TRADING CONDITIONS REPORT

The absence of material corporate/leisure travel, and virtually non-existent international travel, has presented challenging trading conditions for these markets. However, recent data is showing new CBD trends emerge, with a shift in demand from mid-week corporate to the weekend leisure market.

In our latest report: CBD Hotel Market Trading Conditions, we analyse STR’s daily hotel performance data across key CBD locations in Australia and New Zealand to assess how each market has performed and to identify emerging trends over the course of 2020.
  

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Quarantine hotel business for returning citizens had provided initial support over Q2 2020, as Australia and New Zealand went into lockdown and the consequent lifting of restrictions in early June saw an initial bounce in room demand across all markets. However, recent developments in some markets have seen mixed results with Perth and Brisbane emerging as better performers and with Auckland’s demand recovery faltering due to a second lockdown.

Melbourne’s room demand has been impacted by the reintroduction of lockdown restrictions. Conversely, Western Australia’s border closures have resulted in captive workers and local tourists staying in Perth over the weekend. Auckland has benefitted from approximately 40% of its hotel rooms being sold under contract to the government for quarantine purposes; a source of demand that is likely to run through until at least December this year.

KEY CBD MARKET INSIGHTS

For the recent three-month period (June-August), we discovered:  
  • Perth has emerged to record the strongest post COVID-19 recovery of the CBD markets analysed, with increasingly distinct spikes emerging over the weekends as locals indulge in city getaways and interstate workers captive in WA staying in Perth over the weekend.
  • Brisbane’s demand recovery has been one of the strongest, with an observable uptick in demand and ADR across weekends (Fri-Sat) where demand is 33% higher and rates trade at a premium of 15% relative to the working week.
  • Room demand and ADR in Melbourne have remained consistently flat across the week with none of the weekend spike trends seen in other CBD markets. This reflects the virtual absence of corporate and weekend leisure demand under the current lockdown restrictions.
  • A soft recovery has been observed in Sydney room demand after lifting of Stage 3 restrictions on June 1. Unlike Brisbane and Perth, Sydney’s weekend local leisure spikes are still not enough to bring weekend demand/ADR levels to anywhere near pre COVID-19 levels, which reflects the city’s greater reliance on higher yielding inbound demand.  
  • Auckland’s room demand is expected to trend upwards again following the reintroduction of lockdown restrictions in August. ADR in Auckland is consistently higher in 2020 relative to the same period last year, with the higher ADR underpinned by the relatively strong rates paid by the NZ government along with leisure demand peaks over weekends. 

In markets least affected by local movement restrictions, we are seeing shifting demand patterns. Like the booming drive markets, city getaways are growing in popularity, resulting in these weekend spikes. The opening of high-profile luxury hotels in our CBDs over the past few years is also driving this trend, providing locals with greater options for an indulgent city getaway.

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We remain steadfast in providing timely insights and expertise during this unprecedented time.