Increasing inbound tourism is expected to drive up hotel occupancy rates in Australia this year and next, especially in Sydney and Brisbane, according to recent forecasts by CBRE.
The report said domestic travel in commercial accommodations across the country exceeded pre-pandemic levels in 2023, both in terms of travel nights and spending, despite an increase in outbound international travel.
In New South Wales and Victoria, domestic travel nights saw a rise of five per cent and 13 per cent respectively compared to the previous year.
CBRE’s Australian Head of Hotels Research Ally McDade said she anticipated a consolidation in the domestic tourism market throughout 2024 as last year’s outbound travel spike – which was driven by pent-up demand – began to moderate.
“The high cost of overseas flights and accommodation combined with geopolitical tensions globally are expected to benefit the local sector. However, continued pressure on consumer sentiment due to interest rates and cost of living concerns are likely to present ongoing challenges,” Ms McDade said.
The report said ongoing recovery in international visits to Australia, with certain markets like Nepal, Vietnam, Fiji, Ireland and South Korea surpassing 2019 arrival figures.
However, there remains a gap to close, as short-term overseas arrivals were 24 per cent lower than pre-pandemic levels in 2023. Australian outbound travel on a short-term basis rebounded to 88 per cent of 2019 levels in 2023, with nearby regional destinations expected to see further growth.
“Performance indicators experienced solid growth in 2023 with Average Daily Rate (ADR), Occupancy and Revenue Per Available Room RevPAR increasing four per cent, seven per cent and 11 per cent, respectively, although the rate of growth has moderated compared to the rapid pace achieved in 2022,” CBRE Regional Director, Hotel Valuations, Troy Craig said.
In terms of supply, the report notes a likely contraction in the new supply pipeline due to rising borrowing and construction expenses.
Most forthcoming projects will be at the high-end, with few in the mid-range and economy segments.
Melbourne leads in new hotel room construction, yet its occupancy rates remain robust despite increased supply, thanks to the city’s diverse demand base.