Australia Hotel Construction Spiking; Pipeline Shrinking

SYDNEY-There are presently 3,248 hotel and serviced apartment rooms under construction and another 804 rooms considered likely to commence construction over the short to medium term, according to the latest release of Jones Lang LaSalle Hotels’ National Hotel Development Register, which tracks major tourist accommodation development in the 10 major markets in Australia.The projects under construction will increase room supply in these markets by a total of 4% by 2006 and projects currently proposed will add another 1% to supply by 2007, according to the report, which attributes the 6.9% spike in hotel construction activity to a recovery in international visitors and solid domestic tourism. In addition, since the last register 12 hotels with 1,287 rooms have opened, notably budget properties in Sydney and strata-titled resorts (condo-hotels) in the Cairns region. The current hotbed for development is the Gold Coast, says JLL Hotels’ Asia Pacific CEO David Gibson. Indeed, with four large high-rise developments by Sunland Group and Ray Group currently under construction, the Gold Coast accounts for 34.4% of total construction activity with 1,116 serviced apartments likely to come on to the market by late 2005. Development activity is also prevalent in Sydney, Melbourne and Perth, according to the register, but the larger size of Sydney and Melbourne markets limit the impact of these supply additions. Having said that, Gibson adds that “although construction activity has increased, the number of mooted rooms considered likely to go ahead has declined over the past six months. Therefore, in what should be a positive to owners and operators, the total increase to supply expected over the medium term has fallen since we have been compiling this register…with no more projects considered likely to commence construction once the current developments are completed.”Canberra is the only market to experience hotel closures. The latest official statistics reveal supply has decreased by 3.3% over the 12 months to March 2004 as a result of residential conversions, according to JLL Hotels. Since March, 78 rooms have been removed from the market and a further 372 rooms are considered likely to be removed by 2005. “Clearly this, in combination with a 12.7% increase in domestic demand over the past year, is positive news for the remaining hotel operators,” says Gibson. In contrast to the previous National Development Register in March 2004, serviced apartments are no longer the dominant sector for new supply additions, as they now account for 48.4% of rooms currently under construction, as opposed to 59.6% in March 2004, according to the report. “This may be attributed to a weakening in investor demand for residential and residential related property,” concludes Gibson.