The weaker Australian dollar is working in favour of local hotel operators, providing them with a comparative advantage as international travellers target bargain destinations while locals increasingly choose to holiday at home.
This was one of the key outtakes from CBRE’s Q2 Australia Hotels MarketView, which highlights that the depreciation of the Australian dollar will likely persist over the medium term.
“The Australian dollar has been edging lower across a number of different currencies, not just the US dollar,” said CBRE Associate Director of Research Ben Martin-Henry.
“A weaker AUD will continue to support growth in international visitors and the amount they spend in Australia, while also encouraging Australians to travel domestically rather than internationally due to stronger purchasing power at home.”
Headwinds do persist, with CBRE’s report highlighting that while hotel visitor nights have continued to grow nationally, revenue per available room (RevPAR) declined in most major Australian markets in the first half of the year, offset by new supply and a decline in occupancy rates, which led hoteliers to drop room rates.
A large portion of the upcoming supply is of high-end quality, with approximately 14,300 keys becoming available before 2024, accounting for 42% of all upcoming supply.
Hobart and Canberra were the only two Australian markets of the eight covered by CBRE to record RevPAR growth in the year to June 30, of 8.1% and 0.3% respectively.
On the transaction front, CBRE recorded $370m hotel sales in Q2, with the largest deal involving Salter Brothers’ purchase of the Next Hotel in the Brisbane CBD for $150m.
Despite the appeal of the hotel sector to investors, there remains a lack of stock for sale, a theme consistent with most other commercial sectors.
CBRE Hotels National Director Wayne Bunz said stock availability continued to inhibit activity and the vast major of transactions in the first half of the year were dominated by domestic investors.
“This result corroborates CBRE’s 2019 Investor Intentions Survey, which indicated that Australian investors had an increased preference for hotels,” Mr Bunz said.
“However, we’re continuing to field strong international investor demand for select opportunities, particularly in key leisure destinations, as highlighted by last week’s announcement of the sale of the Byron at Byron to The Crystallbrook Collection.”
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