Hotel returns in Sydney and Perth fell sharply in the first three months of the year, while Melbourne remained strong despite sizeable new supplies, according to the latest data from STR, a leading hotel research firm. In Sydney, the main industry indicator, income per available room (RevPAR: `s average daily stay fee multiplied by occupancy rate), fell 5.6% in the year to March. The reason was that the average asking price fell from A $244 a night to A $232 a night, although few new rooms were added.
Perth had to absorb a wave of new hotels, prompting further weakness in the market, with occupancy rates slumping to 72 percent from 76 percent a year ago and asking prices at night down to A $160, sending RevPAR down 7.2 percent.
The latest official Australian tourism data show that international tourists spent a record A $42.5 billion in the year to June 2018 and 9.3 million visitors in the year to February 2019. Despite the boom in tourism this year, hotel returns in Perth and Sydney have fallen.
Prior to the release of the STR data, the latest hotel price index released by Hotels.com showed that International customers in coastal markets such as (Whitsunday Island) in Queensland and (Port Douglas) in Douglas Port paid more for prices than hotels such as Sydney and other capital cities. Hotel analyst Dean Duransfield (Dean Dransfield) said the fall in Sydney prices was partly driven by "malicious competition" as operators wanted to match discounts offered by rivals. "the basic equation of supply and demand is not very large," he said. "the number of tourists is increasing and international and domestic consumption is also rising," Dransfield said in an interview with Australian Financial Review (Australian Financial Review). "what is happening is the behavioural reaction of some hoteliers who are nervous about the increased supply and the competitive impact of other hotels and are worried that the long-term booking outlook will be weak. Many hoteliers are extremely sensitive to the low prices offered online by competitors and try to match them. "Dransfield said he witnessed this attitude first-hand on a recent trip to Sydney. In Sydney, the operator of one of his hotels is considering a price cut to rival his competitors. Its competitors offered a discount of A $159, compared with a normal price of over A $300 per night. "at present, there is a general attitude among hotel owners that if someone steals a customer at a lower price, a further discount is required in order to win it back. This is one of the overreactions of hotel owners to business fluctuations.
Melbourne`s hotel market, helped by a series of events such as the Australian Open (Australia Open) in January and the March Grand Prix (Grand Prix), maintained a high occupancy rate of more than 84 percent, according to STR. The average daily rate increased to more than A $200, indicating the flexibility of the Melbourne hotel market.
Despite Melbourne`s large expected growth in hotel room supply and the booming Airbnb market, the hotel market has continued to grow steadily. The Brisbane and Adelaide hotel markets also performed more resilient than Sydney and Perth during the period, according to STR data.
In addition, although Sydney is considered a gateway city to attract international tourists, local hotel services have not been approved to meet the standards of the gateway city. Underinvestment and high labor costs are considered to be part of the cause.
Sydney has experienced under-investment in the hotel industry since the 2000 Olympic Games, only to ease in 2017 after the opening of the Sofitel Hotel (Sofitel) in Darling Port.
According to the Sydney Morning Frontier, some hotel industry experts believe that underinvestment has contributed to the stale hotel facilities in Sydney. In addition, high prices and high labor costs also put a drag on the hotel industry`s high level of service.
(Suchad Chiaranussati), chairman of the board of directors of SCCP, the investment group, said Sydney`s upscale hotels were "generally outdated and well below expectations of global portal city standards".
(Andrew Heithersay), the group`s general manager, said Sydney`s hotels were "underperforming" compared with major cities in Asia, the United States and Europe. This is mainly because downtown hotels are less profitable than residential and commercial buildings.
Picken (Felicity Picken), a lecturer at the School of Social Sciences and Psychology at the University of West Sydney, said the high prices at the Sydney hotel have made it harder for visitors to expect more from the hotel and to make it harder for them to be satisfied.
Bernadis (Simon Bernardi), managing partner at travel firm Australia & Beyond Holidays, said several luxury hotel facilities in the city centre had not been upgraded, which also affected their fees to guests. Although hotel prices in Sydney are usually higher than those in Melbourne.
In Melbourne, room rates at the top hotels are mostly under 300 yuan per night. In Sydney, most luxury hotels start at around 300 yuan a night, while the (Park Hyatt), hotel in (The Rocks), the rock district, has a room rate of 1000 yuan per night.
Bernadis also said the high labor costs and the number of temporary staff make it difficult to keep pace with hotel services.
At present, although Australia`s residential construction growth rate is declining, but the hotel industry is in the medium-term stage of rapid growth. Hotel construction in Australia is undergoing its biggest transformation since the Sydney Olympics, fuelled by fast-growing Chinese tourists.
According to Australian media reports, according to the Australian Travel and accommodation Association (TAA), the recovery in the Australian hotel construction industry began three years ago. Since then, more than 40% of new hotels have been built across Australia. In addition, Australia will build 272 new hotels by the middle of the next decade.
Reference:
https://www.afr.com/real-estate/commercial/hotels-and-leisure/sydney-hotel-returns-slump-as-nervous-operators-undercut-one-another-20190423-p51gfs
