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Growth, opportunity in the Land Down Under
April 15 2013

Australia will attract more than 5.8 million visitors during 2013 with inbound stream of demand projected to grow by 2.3% per annum for the next decade.

Highlights
  • During 2013 Australia will attract more than 5.8 million visitors, according to the WTTC.
  • The country is in its 22nd year of continuous economic growth, according to an Austrade report.
  • Most key markets have reported increases in ADR and RevPAR, according to STR Global.
By David Grossniklaus
HNN contributor
david.grossniklaus@ehl.ch

 

Whenever I meet Australians in London (or should I say my Aussie mates?) I like to joke that Australia is at the end of the world. They are quick to respond that anywhere they want to go takes them just six hours to fly to—so they should not be surprised that their country typically is not on the hot list for hoteliers and investors in Europe or in the U.S.

Unfortunately, distance seems to undermine Australia’s fantastic economic and tourism growth story.

The market
According to the World Travel & Tourism Council, during 2013 Australia will attract more than 5.8 million visitors and exports are expected to increase 3.6% over the previous year. The inbound stream of demand will continue to grow by 2.3% per annum until 2023.

According to the Australian Bureau of Statistics, short-term visitor arrivals from January 2012 to 2013 increased by 6.2% with arrival numbers in January 2013 reaching 495,000.

David Grossniklaus
 

A recent Austrade report indicated that demand from Asia is expected to increase by 4.7% between 2012 and 2014, mainly led by increased inbound visitors from China.

The country is in its 22nd year of continuous economic growth and is the 12th largest in the world with gross-domestic-product growth expected to increase by 3% in 2013 and 3.4% in 2014, the same Austrade report found.

Furthermore, the aviation sector (you definitely need to fly to get Down Under) is expected to increase its capacity to Australia by 50% by 2020, Austrade found. The recent announcement of Qantas teaming up with Emirates and the increased number of flights from Asian carriers such as China Southern Airline and Sichuan Airlines shows increased connectivity with the rest of the world will be, among others, one of the big drivers of tourism growth in the coming years.

Hotel performance
The Northern Territories and Western Australia posted the largest increases in revenue per available room during 2012, posting gains of 11% and 8.7%, respectively, according to STR Global, sister company of HotelNewsNow.com.

The growth for both markets was led by increased average daily rate, particularly in Western Australia where ADR was up 9.3% during the year, according to STR Global.

Western Australia reported the strongest absolute ADR and RevPAR at 209.44 Australian dollars and AU$168.77, respectively, during 2012. Sydney, the country’s largest city, finished the year with the highest occupancy (81.2%).

Not all markets posted growth, however. Australia’s capital, Canberra and the surrounding Australian Capital Territory reported decreases in both occupancy (-2.6%) and RevPAR (-2.2%). Also reporting occupancy declines during 2012 were Victoria Regional (-1.5%), Sydney (-1.1%), Tasmania (-0.8%) and Western Australia (-0.5%), according to STR Global.


Click image to enlarge.

During the first two months of the year, the Northern Territories reported the largest occupancy increase (+4%), followed by Melbourne (+3.4%). Victoria Regional reported the largest gain in ADR (+8%). And Tasmania posted the biggest jump in RevPAR (+11.7%).

Both South Australia and Canberra and the ACT reported decreases in all three performance metrics during the first two months of the year, according to STR Global.

During the same period, Tasmania and Sydney were the only two markets reporting occupancy levels of more than 80%.


Click image to enlarge.

The outlook
The Australian Government long-term objective as laid out in its “Tourism 2020” plan is to increase tourism expenditure between AU$115 billion and AU$140 billion by 2020.

Industry experts seem to be in consensus on Australia’s long-term development potential.

“Growth in the average room rate of 3.7% per year will underpin average RevPAR growth of 4.3% over the next three years,” said Deloitte Access Economics’ Lachlan Smirl.

Further supporting this view is Paul Guest, LaSalle Investment Management’s head of research and strategy for the Asia/Pacific region, who said in an article in the Australian Financial Review (subscription required) he is “favorable on Australia's hotel market over the medium to long term, supported by growing regional demand for leisure tourism and a steady expansion in business travel.”

Returns from hotels could beat traditional property asset classes as more buyers bid up prices, he added.

“As an increasing amount of capital targets good quality Australian real estate, select hotel assets will become attractive outperformers relative to (central business district) offices or sub-regional retail centers,” Guest said.

Dillip Rajakarier, CEO of Minor Hotel Group, discussed his high hopes in a recent Newcastle Herald article. “Australia has a strong economy and a tightly held hotel sector, and we are bullish about the growth prospects in 2013.”

As domestic and foreign capital inflow continues to grow in the coming years to support hotel development projects, I believe we will hear more from Australia’s developments from developers and operators—even from the opposite side of the world.

David can be contacted on david.grossniklaus@ehl.ch Follow him on Twitter @dgrossniklaus.

The opinions expressed in this column do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, STR and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

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