Report: Sydney to Lead Australia's Hotel Market Recovery

SYDNEY-Sydney will lead the national recovery in Australia’s major hotel markets in 2004 as a recovery in demand pushes the city’s average daily occupancy into the high-70% range, its strongest level since the mid 1990s, according to a new report by Jones Lang LaSalle. From 2004 onwards, the report says increasing occupancies in Sydney in 2004 should enable operators to boost ADR levels to the high $140 range, taking RevPAR to its highest level recorded since the market has been tracked.”The ongoing impact of supply reductions means that during 2003 Sydney should have recorded the highest occupancy for six years and achieved the highest ADR since the Olympics,” adds JLL senior vice president Troy Craig. “That said, we expect demand for 2003 to have ended on a net decline due to the impact of SARS during the first half of the year.”Melbourne, meanwhile, is another story. Ongoing supply additions have and will continue to erode occupancy and ADR until the market reaches equilibrium, according to the report. “Over the next two years we anticipate occupancies to hover around the low 60 percent range, and ADR to drop to high $120 levels,” says Craig. “Given the recent performance and supply pipeline, we don’t expect Melbourne’s RevPAR to return to growth until 2006.”The Brisbane hotel market is the steady producer. Over the past two-and-a-half years, the market has posted consistently strong performances has “In particular, the Rotary conference and Rugby World Cup matches boosted demand during 2004,” says Craig.On the Gold Coast, supply reductions have been at the low end of the market. As a result, demand and occupancy have deteriorated in the year to date but ADR and RevPAR have increased. Looking to the future, the report says the opening of the new Gold Coast Convention Centre in mid 2004, along with a recovery in international travelers should allow the market to absorb some modest supply increases (mostly serviced apartment-style products) and enable occupancy at hover around the 65% level over the next few years. “Cairns has been a major beneficiary of the launch of Australian Airlines late in 2002,” says Craig, “and we expect results for 2003 to show that growth in demand for tourist accommodation reached its highest level since 1999.” On the other hand, the report says the completion of many new strata projects in Cairns and its northern beaches over the next two years is likely to pull market-wide occupancy back to the mid-to-low 60 percent range, and increased competition will constrain ADR growth. “That said, individual properties that are well established should outperform the broader market,” says Craig.