The Australian hotel market is mirroring the residential market in terms of supply impact, according to new research from CBRE.
The firm’s ‘How significant is the supply impact’ Viewpoint states that some areas are seeing large amount of supply coming into the pipeline, whereas others are showing a significant lack of future supply.
CBRE Hotels’ research manager Benjamin Martin-Henry said that the hotel market in Australia is split between cities that are suffering from oversupply such as Darwin, Brisbane and Perth and cities with demand growth outstripping supply growth such as Cairns, the Gold Coast and Sydney.
“Supply is not the only determining factor when it comes to hotel performance but with tourist numbers ever increasing and with room rates falling in some markets, it is evidently a big factor,” Mr Martin-Henry said.
“Sydney is in an extended period of exceptional demand growth for hotels which has been aided by decreases in supply. Increases in tourist numbers, both domestic and international, and withdrawals from the market place has seen RevPAR (revenue per available room) increase by 20% at the same time as demand grew by 6% whilst supply fell away slightly.”
“We forecast that there will be a 9% increase in supply over the next three years, but that demand will increase at a faster pace leading to more convergence between the two.”
CBRE Hotels’ National Director Wayne Bunz said that Cairns had not experienced any supply growth over the past four years, whilst also benefiting from a growing tourist sector. This has made Cairns the fastest growing major city, in terms of RevPAR, in Australia.
“CBRE has recently brought the iconic Cairns Courthouse Hotel to the market and we have already seen significant interest in the property due to the fact Cairns is recognised as the one of the most popular tourist destinations in the country,” Mr Bunz said.
“The Gold Coast is in a similar situation to Cairns in that it is also seeing limited increases in hotel rooms expected over the medium term. With the city gearing up for the Commonwealth Games in 2018, the demand growth will only continue to outstrip the supply growth.”
In Perth during the peak years, developers and investors were keen to take advantage of the booming resource market and building commenced on several new projects. The recent downturn however has meant these hotels will now come into the market in a period of decline.
CBRE Research forecasts that around 3,000 new rooms will become available in Perth over the next five years, equating to around 30% of the current CBD stock. However, given that the new supply will mostly be in the five star category and therefore operators can charge higher rates, overall rates won’t be significantly affected.
Brisbane has already seen a wave of new hotels opening over the last few years, with supply increasing by around 29% between December 2013 and December 2015. Demand has not been able to keep pace, resulting in falling occupancy rates.
“However, it is expected that supply growth in Brisbane will slow down after 2019 and tourism numbers are also expected to increase which will assist in stabilising the room rate,” Mr Bunz said.
The report concludes that operators in markets suffering from the mining decline may need to diversify their offerings in order to stand out from the crowd and attract consumers. Conversely, the limited pipeline in the markets with strong tourist numbers has resulted in record room rates and present ample opportunity for developers to start the next phase of the development cycle.
The firm’s ‘How significant is the supply impact’ Viewpoint states that some areas are seeing large amount of supply coming into the pipeline, whereas others are showing a significant lack of future supply.
CBRE Hotels’ research manager Benjamin Martin-Henry said that the hotel market in Australia is split between cities that are suffering from oversupply such as Darwin, Brisbane and Perth and cities with demand growth outstripping supply growth such as Cairns, the Gold Coast and Sydney.
“Supply is not the only determining factor when it comes to hotel performance but with tourist numbers ever increasing and with room rates falling in some markets, it is evidently a big factor,” Mr Martin-Henry said.
“Sydney is in an extended period of exceptional demand growth for hotels which has been aided by decreases in supply. Increases in tourist numbers, both domestic and international, and withdrawals from the market place has seen RevPAR (revenue per available room) increase by 20% at the same time as demand grew by 6% whilst supply fell away slightly.”
“We forecast that there will be a 9% increase in supply over the next three years, but that demand will increase at a faster pace leading to more convergence between the two.”
CBRE Hotels’ National Director Wayne Bunz said that Cairns had not experienced any supply growth over the past four years, whilst also benefiting from a growing tourist sector. This has made Cairns the fastest growing major city, in terms of RevPAR, in Australia.
“CBRE has recently brought the iconic Cairns Courthouse Hotel to the market and we have already seen significant interest in the property due to the fact Cairns is recognised as the one of the most popular tourist destinations in the country,” Mr Bunz said.
“The Gold Coast is in a similar situation to Cairns in that it is also seeing limited increases in hotel rooms expected over the medium term. With the city gearing up for the Commonwealth Games in 2018, the demand growth will only continue to outstrip the supply growth.”
In Perth during the peak years, developers and investors were keen to take advantage of the booming resource market and building commenced on several new projects. The recent downturn however has meant these hotels will now come into the market in a period of decline.
CBRE Research forecasts that around 3,000 new rooms will become available in Perth over the next five years, equating to around 30% of the current CBD stock. However, given that the new supply will mostly be in the five star category and therefore operators can charge higher rates, overall rates won’t be significantly affected.
Brisbane has already seen a wave of new hotels opening over the last few years, with supply increasing by around 29% between December 2013 and December 2015. Demand has not been able to keep pace, resulting in falling occupancy rates.
“However, it is expected that supply growth in Brisbane will slow down after 2019 and tourism numbers are also expected to increase which will assist in stabilising the room rate,” Mr Bunz said.
The report concludes that operators in markets suffering from the mining decline may need to diversify their offerings in order to stand out from the crowd and attract consumers. Conversely, the limited pipeline in the markets with strong tourist numbers has resulted in record room rates and present ample opportunity for developers to start the next phase of the development cycle.
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ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
