Hotel RevPAR to stagnate over next 3yrs

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Property Council of Australia, 27 August 2012


Over the next three years the overall Australian hotel market will experience continued room occupancy growth, to a stabilised rate of around 66 to 67 percent, according to the AHS Advisory Hotel Performance Outlook – August 2012.

According to the outlook, occupancy in key cities, of 80 percent and above, will keep the rate high, while leisure and regional destinations will experience lower levels.

AHS says the occupancy rate will exceed the 2007 peak.

Historically room rates have increased by up to 7 percent during peak occupancy but the GFC has forced more moderate pricing in the market.

“The GFC seems to have triggered a much more cautious pricing behaviour which, combined with the increasing pressure from online distribution platforms, has reduced rate growth potential by 2 percent to 3 percent country wide, and significantly more in the cities,” the outlook says.

Given the all-time high room occupancy in key cities, over the next three years, room rate growth across Australia is forecast to outperform inflationary growth by about 1 percent.

According to AHS, room rate growth will stabilise at a longer term growth rate of around 4 percent.

However, growth in real terms will be lower.

“… as the base for this growth steadily increases, the actual growth rate declines, from 5-6 percent to 3-4 percent, due to the increasingly limited room occupancy growth opportunity and increasing reluctance to aggressively grow room rates,” the outlook says.

“The impact of this slowdown in growth rates is stagnation in real growth when an adjustment for inflation is made, with country-wide revPAR poised to remain at around $100 in 2012 values, which it already achieved in 2008, and significantly exceeded in the late 1990s.”

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