Traditional middle of the pack performers in the hotels market, Canberra and Adelaide, have outperformed the majority of other cities in the first quarter of 2017.
According to CBRE’s latest Australia Hotels MarketView for Q1 2017, Canberra holds the top spot, with Adelaide third. Cairns came in at second for the quarter and remains the top performer on an annual basis.
Benjamin Martin-Henry, CBRE Research Manager, said that after a stable performance in 2016, Canberra and Adelaide both recorded increases in occupancy rates, average daily rates (ADR) and revenue per available room (RevPAR).
“Adelaide has been one of the star performers over the last six months, continuing its rebound after a poor couple of years. Its stable supply pipeline, increasing numbers of domestic and international tourists, as well as a strong growth in the corporate travel sector has all led to its success,” Mr Martin-Henry said.
The report states that Adelaide’s yearly ADR grew 1.4% to $151 and occupancy increased 3.5% to 78.1% which translated into RevPAR growing by 4.9% to $118.
Canberra posted increases of 2.9% ADR, 3.2% occupancy raise to 75.9% and a RevPAR growth of 6.2% to $128.
“These strong results are due to a limited supply pipeline, substantial increase in domestic tourists and strong business travel. Limited international tourist interest in the city means the market is highly dependent on domestic tourism.”
On a national level, annual RevPAR growth for the year ending March 2017 was 2.3% at $140. ADR increased 1.2% to reach $185 and occupancy jumped 1.1% to 75.8%.
On the transaction side, the first quarter saw a relatively low level of sales take place, at just under $300 million.
Wayne Bunz, National Director, CBRE Hotels, said that Victoria saw the majority of the first quarter transactions, following on from the busy end to the year that Melbourne CBD experienced, transacting over half a billion dollars’ worth of deals.
“Nationwide, we expect to see less sales activity in 2017. This is certainly not due to lack of demand but rather investors struggling to find quality stock to purchase following a number of strong years of activity,” Mr Bunz said.
The supply pipeline across Australia is strong, with new hotels opening up on a regular basis across the country.
“International visitor arrivals reached a record high of 7.6 million over the past 12 months, with domestic overnight trips also up to 90.7 million. Both domestic and international developers are keen to take advantage of the strong tourism industry so we do not expect to see the interest drop any time soon, especially in key markets such as Sydney and Melbourne,” Mr Bunz concluded.
State-by-state commentary
Brisbane
Brisbane continues to see demand unable to keep pace with supply, with occupancy falling 0.4% to 72.4% resulting in a fall in RevPAR of 6.1% to $115. However, the pace of decline is slowing which indicates the worst of the cycle may be over. An increase in tourist volumes will further reduce this rate of decline.
Cairns
Cairns continues to perform extremely well, especially in the international tourist market, with China, Japan and the US accounting for 60% of hotel nights. It posted double digit annual RevPAR growth of 10% to reach $119, a combination of significant occupancy rates up 2.6% to 83.6% and ADR up 7.8% to $140. Developers are taking advantage of the recent strong performance, and although Cairns hasn’t seen a new hotel in almost 20 years, there are development applications lodged for over 400 new rooms across three hotels.
Hobart
Hobart began 2017 on a positive note and maintained its solid performance, with occupancy growing 1.7% to 82.4%, ADR growing 3% to $171 and a culminated RevPAR increase of 4.7% to $141. The strong increase in tourist levels is a key driver for this over the last two years. Hobart is set to see a surge in supply over the next few years as developers look to tap into the interest in the region from overseas, particularly China.
Melbourne
Melbourne experienced a strong March quarter which resulted in a slight increase in ADR for the year, up 0.1% to $185. Occupancy increased 1.5% to 83.8% and RevPAR rose 1.6% to $155. The market will be tested in 2018 when a number of new developments open including Ibis Melbourne and Novotel Melbourne, both in Little Lonsdale. This will limit operators ability to increase rates.
Perth
Perth is suffering from a slew of new supply and occupancy has continued to fall in the last 12 months, down 3.4% to 77.7%. ADR dropped 6.9% to $179, with RevPAR decreasing 10.1% to $139. An increase in corporate travel may help slow the rate of decline but with several projects due for completion in 2017/8, rates will continue to fall.
Sydney
Sydney has once again performed well, maintaining its strong room rate with an ADR increase of 4.5% to $223 and occupancy increase of 0.2% to 85.3%, resulting in a RevPAR increase of 4.8% to $190. A 20% increase in international tourists has helped drive the growth, although a 10% decline in domestic tourists is perhaps a sign they are being priced out. Sydney has a number of new projects scheduled, but the new supply should easily be absorbed given the cities prominence as a global attraction.
According to CBRE’s latest Australia Hotels MarketView for Q1 2017, Canberra holds the top spot, with Adelaide third. Cairns came in at second for the quarter and remains the top performer on an annual basis.
Benjamin Martin-Henry, CBRE Research Manager, said that after a stable performance in 2016, Canberra and Adelaide both recorded increases in occupancy rates, average daily rates (ADR) and revenue per available room (RevPAR).
“Adelaide has been one of the star performers over the last six months, continuing its rebound after a poor couple of years. Its stable supply pipeline, increasing numbers of domestic and international tourists, as well as a strong growth in the corporate travel sector has all led to its success,” Mr Martin-Henry said.
The report states that Adelaide’s yearly ADR grew 1.4% to $151 and occupancy increased 3.5% to 78.1% which translated into RevPAR growing by 4.9% to $118.
Canberra posted increases of 2.9% ADR, 3.2% occupancy raise to 75.9% and a RevPAR growth of 6.2% to $128.
“These strong results are due to a limited supply pipeline, substantial increase in domestic tourists and strong business travel. Limited international tourist interest in the city means the market is highly dependent on domestic tourism.”
On a national level, annual RevPAR growth for the year ending March 2017 was 2.3% at $140. ADR increased 1.2% to reach $185 and occupancy jumped 1.1% to 75.8%.
On the transaction side, the first quarter saw a relatively low level of sales take place, at just under $300 million.
Wayne Bunz, National Director, CBRE Hotels, said that Victoria saw the majority of the first quarter transactions, following on from the busy end to the year that Melbourne CBD experienced, transacting over half a billion dollars’ worth of deals.
“Nationwide, we expect to see less sales activity in 2017. This is certainly not due to lack of demand but rather investors struggling to find quality stock to purchase following a number of strong years of activity,” Mr Bunz said.
The supply pipeline across Australia is strong, with new hotels opening up on a regular basis across the country.
“International visitor arrivals reached a record high of 7.6 million over the past 12 months, with domestic overnight trips also up to 90.7 million. Both domestic and international developers are keen to take advantage of the strong tourism industry so we do not expect to see the interest drop any time soon, especially in key markets such as Sydney and Melbourne,” Mr Bunz concluded.
State-by-state commentary
Brisbane
Brisbane continues to see demand unable to keep pace with supply, with occupancy falling 0.4% to 72.4% resulting in a fall in RevPAR of 6.1% to $115. However, the pace of decline is slowing which indicates the worst of the cycle may be over. An increase in tourist volumes will further reduce this rate of decline.
Cairns
Cairns continues to perform extremely well, especially in the international tourist market, with China, Japan and the US accounting for 60% of hotel nights. It posted double digit annual RevPAR growth of 10% to reach $119, a combination of significant occupancy rates up 2.6% to 83.6% and ADR up 7.8% to $140. Developers are taking advantage of the recent strong performance, and although Cairns hasn’t seen a new hotel in almost 20 years, there are development applications lodged for over 400 new rooms across three hotels.
Hobart
Hobart began 2017 on a positive note and maintained its solid performance, with occupancy growing 1.7% to 82.4%, ADR growing 3% to $171 and a culminated RevPAR increase of 4.7% to $141. The strong increase in tourist levels is a key driver for this over the last two years. Hobart is set to see a surge in supply over the next few years as developers look to tap into the interest in the region from overseas, particularly China.
Melbourne
Melbourne experienced a strong March quarter which resulted in a slight increase in ADR for the year, up 0.1% to $185. Occupancy increased 1.5% to 83.8% and RevPAR rose 1.6% to $155. The market will be tested in 2018 when a number of new developments open including Ibis Melbourne and Novotel Melbourne, both in Little Lonsdale. This will limit operators ability to increase rates.
Perth
Perth is suffering from a slew of new supply and occupancy has continued to fall in the last 12 months, down 3.4% to 77.7%. ADR dropped 6.9% to $179, with RevPAR decreasing 10.1% to $139. An increase in corporate travel may help slow the rate of decline but with several projects due for completion in 2017/8, rates will continue to fall.
Sydney
Sydney has once again performed well, maintaining its strong room rate with an ADR increase of 4.5% to $223 and occupancy increase of 0.2% to 85.3%, resulting in a RevPAR increase of 4.8% to $190. A 20% increase in international tourists has helped drive the growth, although a 10% decline in domestic tourists is perhaps a sign they are being priced out. Sydney has a number of new projects scheduled, but the new supply should easily be absorbed given the cities prominence as a global attraction.
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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 (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. 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 (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
