Australia’s hotel sector on track for 2025 to be a year of growth and investment

A surge in international arrivals and steady domestic demand in 2024 has put Australia’s hotel sector on track for a full recovery by the end of 2025, with all major cities recording occupancy growth, new CBRE data shows.

CBRE’s latest Hotels Australia Overview and Outlook report notes while the pace of growth will continue at a moderate rate in 2025, the sector remains resilient with strong performance in key cities.

National occupancy rates sit at 71%, up 2% year-on-year, while average daily rate (ADR) remains stable at $240 and revenue per available room (RevPAR) is up 3.8% to $171.

Sydney, Brisbane, Perth and the Gold Coast achieved y-o-y gains across the key performance indicators of occupancy, ADR and RevPAR in 2024.

CBRE’s Australian Head of Hotels Research Ally Gibson noted that while the pace of growth in the sector slowed over the year from the record highs achieved in 2023 Australia’s long-term performance outlook remains strong.

“Notably, Brisbane, Perth and the Gold Coast were the only markets to record pre-pandemic rates across all three performance indicators. Melbourne and Hobart face challenges from increased supply and softer domestic leisure demand, though both markets recorded a strong increase in international visitation.

CBRE Regional Director, Hotel Valuations, Troy Craig said, “With major events, premium hotel openings, and infrastructure projects in the pipeline, the outlook for the Australian Hotel sector remains positive.”

Travel is well and truly back with Australia’s international arrivals now 13% below pre-pandemic levels with strong demand from China, India and Southeast Asia. The report found tourism recovery has been further boosted by the addition of 60 new international flight routes and expansion of existing services in 2024/2025. More than two-thirds of the new routes connect to major East and Southeast Asian destination alongside new connections to America, Europe and the Middle East.

“This growth in international flights reflects a strategic response to pent-up demand from key markets, particularly Asia, and is expected to boost inbound tourism demand and enhance connectivity in 2025. Future infrastructure projects, including Sydney’s Western Sydney Airport expansion, Melbourne’s third runway and the $2billion redevelopment of Perth Airport will further enhance Australia’s air connectivity and global reach,” Mr Criag added.

Overseas travel for Australians is now slightly above pre-pandemic levels Indonesia, New Zealand and Japan making up the top three destinations with holidaymakers prioritising affordable luxury experiences.

Nationally, domestic travel spend is up 34% on pre-pandemic levels however, y-o-y spending growth is only up 2% as cost-of-living increased put pressure on discretionary spending. Leisure travel continued to dominate but there was strong growth across meetings, incentives, conferences and exhibitions (MICE) related travel.

Transaction volumes slowed in 2024 with vendor/purchaser price gaps, high interest rates and barriers to finance contributing to investor caution. However, the report notes stronger investment momentum and growth is expected in 2025. This follows the recent release of CBRE’s Asia Pacific Hotel Investor Intentions Survey which found more than 72% of investors plan to buy more hotel assets in Asia Pacific. Sydney was the second most popular city for hotel investment, behind Tokyo who took the top spot.

On the supply front, a total of 1,800 rooms were added to the market with delays and pipeline shifts pushing some planned hotel openings to 2025. More than half of the new supply (56%) is in the premium market. Looking ahead, there are 5,700 rooms under construction and set to open within the next two years. A total of 31% of these new rooms will be in Melbourne followed by Sydney (29%).

CBRE’s expectation is 2025 will be a pivotal year for growth and investment in Australia’s Hotel sector.