LONDON--The near-term future of the hotel industry in Australia is looking especially challenging. The global economic crisis spreading throughout the world has caused many problems for the industry, and recent natural disasters will contribute to further problems.
According to STR Global, Australia as a whole saw decreases in occupancy and revenue-per-available-room figures up through the end of 2008. Occupancy was never positive during the last quarter of the year, and RevPAR was stalling. While not seeing as sharp a decrease as other countries, the decline is still prevalent and widespread.
But there are some bright spots amid the gloom. Certain cities, such as Melbourne, saw positive RevPAR at the end of 2008. In addition, average daily rate continues to stay positive for the country as a whole, mitigating the declines in occupancy. But will the trend continue?
Unfortunately, due to a lack of travel fuelled by the global economic crisis, hotels in Australia are expected to have a discouraging start to 2009. According to UNWTO World Tourism Barometer, the country saw the weakest tourism arrival figures in several years, at -1.5 percent for 2008. This was brought on by the increasing exchange rates, as well as the increased cost of air travel.
The increase cost of air travel is especially troublesome, as Australia is a distant destination for many travellers—especially for those from the country’s principal tourist markets, such as North America, Europe (especially the U.K.), Japan and India. As reported by UNWTO, it is expected that inbound international tourism will fall 4 percent in 2009—the worst drop since 1989. While internal spending on domestic travel may increase because residents are not travelling abroad, domestic travel is also expected to decline by 1 percent.
If the financial crisis was the only factor affecting hotels and travel for Australia, recovery might not be as difficult for hotels and the travel industry. In addition, there is hope that falling oil prices will stimulate tourism demand in 2009. Recent events, however, throughout the country are poised to hurt hotel figures even more.
Many states in Australia are currently going through severe natural disasters. The populous East Coast has been ravaged by extremes of fiery drought and torrential rains. Beginning a few weeks ago, the Northern area of the East Coast has been experiencing the worst flooding in more than 30 years, specifically areas in New South Wales (particularly Sydney) and the majority of Queensland. Floods have isolated more than 5,000 people across the North of New South Wales, and 62 percent of Queensland has been submerged for weeks. These figures are expected to rise, as the tropical monsoon season is approaching. Both states have been declared natural disaster areas by the State Emergency Service.
Following the floods, intense wildfires began throughout the state of Victoria on 7 February, resulting in a total death toll of 201 to date. The city of Melbourne is experiencing the brunt of these fires, which have been labelled as some of the worst and deadliest fires seen in the world. Over 1,800 homes and 1,500 square miles have been destroyed by these fires, resulting from severe drought. Melbourne, for instance, is reported by the State Emergency Service to be having a record dry start to 2009, with less than one-tenth of an inch of rain since 1 January. One unfortunate, but positive, outcome of these natural disasters is the need for accommodations by displaced homeowners, cleanup workers and governmental officials.
This unfortunate combination of factors makes it difficult to see a quick turnaround for hotels in Australia. People are already hesitant to travel and spend money on vacation due to economic conditions, and the flooding and fires will further these feelings of uneasiness, especially among international travellers looking to the country as a possible travel destination. While some regions expecting high tourism demand due to the new movie “Australia” are not affected by the natural disasters currently taking place, the looming economic crisis in other areas of the world will affect these areas. It looks, at least for the short-term, that hotels in Australia are heading into difficult times.