Corporate boost for big city hotels

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Australian Financial Review, 10 February 2011

Australia’s major capital city hotel markets are expected to strengthen in 2011, and increasing corporate activity should boost room rates and occupancy levels, according to the Hotel Market Outlook report from Deloitte.

However, resort markets are expected to remain weak, as the stronger currency results in fewer domestic and international tourists holidaying in Australia.

Rutger Smits, the head of tourism, hospitality and leisure at Deloitte, said Australia’s strengthening economy and low levels of new supply were keeping occupancy levels high and driving up room rates in corporate markets. Sydney and Perth would continue to outperform in 2011, Mr Smits said, while resort locations would stay weak as tourists stayed away.

Mr Smits said tourism in Queensland would be hampered by negative perceptions regarding the condition of facilities and infrastructure, even though many areas avoided the recent floods and cyclone Yasi.

On average, the national room occupancy rate is expected to rise to 65.6 per cent at the end of 2011, from 62 per cent at the end of 2009 and 63.9 per cent at the end of last year.

Revenue per available room (RevPAR) is tipped to rise by 9.1 per cent on average, to $97, up from $84 at the end of 2009 and $89 at the end of last year

At the end of 2010, Sydney occupancy levels sat at 85.6 per cent and were tipped to reach 87 per cent this year, compared with a pre-global financial crisis peak of 82 per cent. RevPAR is expected to grow by 13 per cent this year, to $171, as room rates gain 11.4 per cent.

In Perth, RevPAR is forecast to rise by 20.6 per cent to $157 by the end of the year, while occupancy is expected to soar from 82.5 per cent to the highest level nationwide – that is, 88.4 per cent.

Mr Smits said he expected Perth room rates to pass Melbourne rates and inch closer to Sydney’s, as demand from resources companies drives up the occupancy rate.

In Melbourne, 13.2 per cent RevPAR growth is expected in 2011, to $156, while the occupancy rate is expected to rise from 79.8 per ent to 82 per cent. Average room rates are tipped to rise from $173 to $191.

Brisbane room rates are expected to increase from $161 to $177, and the city’s occupancy rate should rise from 78.8 per cent to 82 per cent. RevPAR should increase by 15.4 per cent to $145.

Adelaide’s occupancy rate is forecast to decline slightly, from 76.7 per cent to 76 per cent, and the average room rate is expected to rise from $143 to $149. RevPAR is tipped to gain 3.6 per cent from $110 to $113.

Rutger Smits was the National Leader for Tourism, Hospitality and Leisure at Deloitte until October 2011. He now manages his own hotel consulting business, AHS Advisory

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