Rapid improvements in tourism boost hotel occupancy rates
Everyone is either on holiday or knows someone who is right now and after a few years of border restrictions we have started to see a rapid increase in international and domestic travel. This has fueled huge increases in flight prices, continued pressure on already high car rental costs, and is now reflected in improved hotel occupancy rates and average daily room rates (ADR). However, caution remains in order, with international travel for some of the population, uncertainties over COVID-19 vaccination and testing requirements, mask mandates and high insurance costs all channeling more visitors to inner journeys.
Recent aviation statistics echo this sentiment, with domestic passenger movements rebounding to pre-COVID-19 levels, recorded at 4.52 million for the month of June, while increasing 92% over the year, still below the 5 million and more reached before 2020. Internationally, we are also seeing growth in inbound and outbound passengers, with May results reaching 1.3 million, slightly slower to return to 4 million in January 2020. As the airline industry experiences its own setbacks; staff shortages leading to cancellations, delays, baggage issues, travel demand continues to rebound. These results are encouraging for our domestic hotel market, with most air travel being for domestic movements and inbound international passengers, giving our local tourism industry a much-needed boost.
The improvement in hotel occupancy has been remarkable over the past 12 months, with the major winter school holiday tourist hubs of Darwin and Cairns seeing occupancy hit 83.5% and 82.8% respectively after rising to just over 50% in July 2021. This resulted from sharp increases in ADR of over 24% for each market to $294 per night in Darwin and $263 per night in Cairns. Canberra continues to recover as government activity levels return to pre-COVID-19 levels, along with the booming tourism market, resulting in occupancy now at 80.3% after s’ be set at 22.4% just 12 months ago, with a 27.8% increase in ADR to $223 per night. Despite the cooler weather, Gold Coast and Brisbane also saw strong increases in occupancy which saw room rates increase by up to 25% over the same period, with this market benefiting holidaymakers as well as those returning visiting friends and family and business and conferences. sectors. Sydney stood out for daily room rate growth, up 34.7% to $241 per night, despite still having one of the lowest occupancy rates in Australian markets at 66.2%. A further recovery in business travel is needed to improve vacancy rates in Sydney and Melbourne, which in turn will increase RevPAR levels.
Demand to buy hotel assets continued. Overseas buyers have been active investors in Australia’s tourism market, however, after a few quiet years for the asset class, investment is expected to pick up. Recall that across the country, the occupancy rate is 68.9% compared to 38.5% a year ago, while average daily room rates increased by 22.3% to more than $230 per night. These continued improvements in occupancy and revenue, along with improved international aviation and domestic travel statistics, make it an attractive investment choice.