However, there is a light at the end of the tunnel. In line with Colliers International's Investor Sentiment Survey released in June 2009, which reported that Australia's real estate investors believed that we were fast approaching the bottom of the cycle, recent economic indicators point to the same.
"As market sentiment and enquiry levels improve over the next 6 to 12 months, hotel transaction volumes should increase assuming finance becomes more freely available to investors" says Hotels & Leisure sales Executive, Colin Revelman.
Major hotel assets currently on the market include:
- Holiday Inn on Flinders in Melbourne (Eureka)
- Holiday Inn Perth (Eureka)
- Novotel Langley in Perth (TAHL)
- The Sheraton Mirage Resort and Spa in the Gold Coast (under receivership)
- Sheraton on the Park in Sydney
Australia's gateway cities; Sydney, Melbourne and Brisbane have all seen notable declines in hotel occupancy in the 12 month period to March 2009. The Gold Coast market continues to be one of the hardest hit with occupancy down by 3.8 percentage points to 66.6 per cent, due to lower domestic and internal visitor numbers to the city.
While occupancy rates have been trending down in the past 6-12 months across most of Australia's major hotel markets, the declines are coming off the record high levels which were achieved in 2007 and early 2008, a period which saw numerous markets trading at average occupancy at over 80%.
Nevertheless in the latest Australian Bureau of Statistics (ABS) results, there were only two hotel markets which saw improvement in occupancy, albeit at only marginal rates of growth.
In Perth, the average occupancy rate increased by 0.4 percentage points to 82.6 per cent in the 12 month period to March 2009. In Hobart, the average occupancy rate increased by 0.5 percentage points to 73.4 per cent in the same period.
A decline in domestic tourism is the major contributing factor to the lower occupancy rates experienced across the country. "The main factors that are holding back growth in the domestic tourism industry are consumers' concerns of job security, lower discretionary spending and the reduction in business travel" says Colliers International's Research Analyst, Samir Cheytani.
International arrival numbers have declined only slightly, by 1.6 per cent in the 12 month period to May 2009, according to the recent figures released by the Australian bureau of Statistics.
According to Colliers International's Tim Miles, Manager of Hotels & Leisure, another positive take out of the Winter Quarter Hotels INNvestment Report is that "most hotel markets in Australia are well positioned for growth in the upcoming economic recovery given the lack of new room supply on the horizon and potential quick turnaround in international tourism particularly from emerging economies."
Revenue per available room (RevPAR) performance also tells a positive story with a number of Australian hotel markets exhibiting strong growth in the 12 month period to March 2009. However, according to Mr Miles, "anecdotal evidence suggests that the June quarter results are likely to be less positive."
Perth and Canberra have been standout performers with double digit RevPAR gains. Perth experienced RevPAR increases of 18.7% to $135.39 in the 12 month period to March 2009, while Canberra was up by 10.8% to $105.33 in the same period.
Falling occupancy contributed to Gold Coast hoteliers seeing a 5.3% decline in RevPAR, down to $89.33. Similarly in the Sydney market, lower occupancy and cheaper room rates have caused RevPAR to decline by 3.2% to $143.83.
