Hotel performance in Australia holds strong, but the lack of supply could be a concern for the country moving forward

The Australian hotel industry shows no signs of slowing down, with record occupancies in 2014. But there’s a hitch with seriously undernourished room supply now and in the near future, according to sources.

“Despite occupancies charting higher and higher, especially in Sydney and Melbourne, the number of new projects on the cards remains modest relative to the demand outlook,” said Lachlan Smirl, partner of Deloitte Access Economics Australia.

“While both markets posted solid growth in (average daily rate) in 2014, the fact that growth was firmly within the range of its long-term average belied the record high occupancies and did little to boost hotel investment,” Smirl said.

According to Deloitte’s “Tourism and hotel market outlook 2015,” demand for hotel rooms stands to grow at double the pace of supply over the next three years, as overall room count  for new projects slides.

“As hotel markets push further into record territory, demand growth (will) continue outpacing supply,” Smirl said. “Critically, the number of rooms in the three-year pipeline is 15% lower than this time last year.”

Industry is resilient

The potentially critical room shortfall belies the hotel industry buoyancy. The Deloitte report showed 2014 as a bumper year in Australia with peak night occupancy regularly exceeding 90% in Sydney and Melbourne and gaining strong ground in Hobart, Adelaide and on the Gold Coast.

As of February, occupancy in Australia was up 2.1% to 79.3%, according to HNN sister company STR Global. Meanwhile, ADR was up 6.4% to 195.17 Australian dollars ($140.36). Revenue per available room was up 8.7% to AU$154.81 ($111.33).

The hotel industry is experiencing buoyancy unmatched since before the global financial crisis, Smirl said.

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