New Opportunities In Hotel Development

Four years ago, Australia’s resort was fighting as an inflated currency saw the competitiveness of the tourism sector relative to international counterparts drop, feeble financial conditions outside of mining impacted both corporate and leisure travel and reduced levels of investment supposed there was little in the way of forcing new or updated stock from which to bring travelers.

Really, in the two years coming to March 2014, the Australian Bureau of Statistics figures indicate that overall takings from hotels, motels, and serviced apartments fell.

Now, things have changed as a weaker dollar has seen people from the overseas flock in and Australian travelers opt for more optimistic encounters. Within the 3 years to June 2017, data from Tourism Research Australia (TRA) suggests that international and domestic visitor nights climbed by 22 and 14 percent respectively. As a result, TRA reckons overall journey cost will have grown by 21.3 percent from $107.9 billion to $130.9 billion over the 3 years to 2018.

Thus, resorts are fuller and ready to control more. Over the year 2017, real estate services company CBRE says federal occupancy rates edged up 0.9 percent to 76.2 percent, whilst room rates climbed up by 1.8 percent. Hotels on tourist destinations such as this accommodation at Hobart Waterfront have benefited significantly from this surge of tourism.

Moving ahead, expectations are high. In the most recent prediction, TRA said international visitor nights could increase with an average compound rate of 6.4 percent over the five years into 2021/22. National travelers, meanwhile, would increase their visitor nights by a small but respectable average yearly rate of 2.3 percent.

Unsurprisingly, development activity is ramping up. At $3.455 billion, the dollar value of short-term accommodation buildings approved for building within the 12 months to November last year was up 10.7 percent over the year before and by over a third compared with its level three years back. At $3.268 billion in the September quarter (ABS data), the pipeline of building work yet to be achieved on hotels and other short-term accommodation buildings stood at record levels and was up nearly fourfold in four years. Between now and 2022, CBRE expects Perth, Melbourne, Brisbane, and Sydney to add 37, 34, 24, and 23 percent to their stock respectively.

Many factors are driving this. The value of the Australian dollar has improved lately but remains below its level many years ago as it was above parity with the US dollar. This makes Australian traveling relatively cheaper to both overseas visitors and locals alike. An improving world market also bodes well for the two global corporate and leisure travel. In travel destinations in Australia, not only hotels but other segments within the tourism industry have shown growth in earnings. One such example is the helicopter flights on Wineglass Bay, which have seen a steady increase of customers in the past year alone.

Beyond that, Carol Giuseppi, chief executive officer at the accommodation industry advocacy group Tourism Accommodation Australia, pointed to other factors.

First, Australia has inked several Free Trade Agreements over recent years, thus facilitating greater global trade flows and underpinning higher levels of requirement for corporate travel. This includes agreements with all our three biggest export destinations (China, Japan, and South Korea) along with the recently announced deal between the 11 remaining nations involved with the Transpacific Partnership.

Connected to this is an expansion of aviation accessibility and capacity into and out of the country. An agreement reached in 2016 between Australia and China — our largest source of international tourists on nights stayed basis — means Chinese airlines now have unrestricted access into Australia. Last September, meanwhile, US carrier United Airlines unveiled plans for new long-haul flights straight from Houston to Sydney. All this is fostering capacity to attract more travelers in to enjoy the gems Australia has to offer, such as this luxury day spa in Tasmania.

The additional element is that the continuing improvements in making a smooth, automatic encounter for travelers (inclusive online visas, multiple entry visas, the roll-out of Smart Gates and trials of biometric processing).

For your property and construction industry, this raises two points. The quantity of work from the pipeline will induce significant opportunities for contractors, designers, project managers and others involved in new development.

Beyond that, interesting questions encompass that markets provide opportunities for new accommodation offerings.

Boom period in new building

As stated above, builders and others are set to benefit from elevated levels of building work in resorts amid a massive pipeline of jobs and an insufficient indication of a slowdown in new works. In Tasmania, for example, new hotels will appear to compete with existing hotels which have built a fantastic reputation such as this Storytelling hotel.

Benefits will be spread across all major markets. With over 6,000 rooms expected to be delivered between now and 2022 (CBRE prediction ) plus a Victoria-wide pipeline of work ($630.9 million) which is up fourfold in a couple of decades, hotel builders in Melbourne is going to be kept busy for many years. Likewise in Sydney and Brisbane, which are equally expected to add amounts equivalent to about a quarter of the stock (greater than 5,000 rooms and 3,000 rooms respectively) and where the pipeline has increased fourfold in four years in the case of New South Wales and from three and half times over a couple of years in the event of Queensland. Adelaide and Hobart also have decent pipelines.

Perth — and indeed all Western Australia — is equally interesting. With nearly 3,000 rooms scheduled to come online between now and 2020 and a raft of quality resorts in the pipeline, construction sites with giant equipment such as the drake low loaders will very likely be active. As mentioned below, but a worsening glut of inventory may impact the potential for new improvements after the present cycle of action winds upward.

Takeovers, amazing resorts, and Airbnb

Beyond market conditions, there are other interesting developments.

One is the proposed $1.2 billion takeovers of Mantra Group by French outfit Accor — one of the largest hotel operators in the world (subject to regulatory approval). If this proceeds, the nation’s two biggest hotel chains will combine forces.

Secondly, the expansion in the millennial population might precipitate a change in resort design toward brighter and funkier offerings. Millennials, as it was stated, are more attracted to ‘active’ experiences and that bolder designs may be more conducive. Whilst hotels in Australia were yet to dabble in this region, he says the market is waiting for somebody to ‘have a punt.’

Finally, there is Airbnb and the proliferation of ‘quasi-hotel’ commercial operators renting or purchasing up flat inventory for supplying on the short term marketplace to travelers. This concerns licensed accommodation providers who run in commercial zones, pay commercial as opposed to residential prices and has to abide by regulation with regard to safety and public/consumer protection.

While stopping short of stating what effect this was having upon growth choices, Giuseppi claims the impact of short-term letting by international visitors to Australia was significant.

Whilst the lodging sector doesn’t have any problem with people letting out spare rooms in their own houses, she says that there are worries about commercial corporations working on a non-level playing area. 

Australia’s hotel industry is experiencing strong changes. For builders, land developers, and even providers of construction services such as crane hire companies alike, this information presents significant opportunities.