Hoteliers cash in on business travellers

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Australian Financial Review, 22 November 2011


The strong business travel market is driving a surge in demand for city accommodation, prompting hoteliers to increase room rates in Perth by at least 11 per cent this year.

“Business travel demand is up, and the gains on that front have been sufficiently strong to encourage operators to edge up room rates,” says Rutger Smits, the author of the Deloitte Hotel Market Outlook on the performance of the Australian tourism and hotel industries to September 2011.

The resources boom is driving high occupancies in Perth. Rates are expected to jump 11 per cent by year end, making the West Australian capital the fastest growing market in the country, with an expected year- end revenue per available room improvement of nearly 14 per cent over 2010.

In Sydney, Deloitte expects “aggressive room rate growth, projected at 10.5 per cent for 2012 and well above that for further years”.

Although there are significant new hotels being built in Melbourne until 2013, “even these should not dampen further growth in both room occupancy and average room rate in subsequent years”.

While the Brisbane hotel market is performing strongly, Deloitte does not expect big revenue per available room increases, given there are several new hotels coming on stream.

The outlook is not so positive for the Gold Coast, where the opening of three five-star hotels in the past 18 months has resulted in a “troubled” outlook for the Queensland city. Gold Coast occupancies are expected to drop 2.3 per cent over 2010 levels to 66 per cent, with the forecast room rate expected to slip to $133.

More hotel openings in Canberra have translated to an expected softening of its accommodation sector, with Deloitte downwardly revising its occupancy forecasts but at a slightly higher room rate.

In Adelaide, further additions to supply in the central business district are expected to result in lower room occupancy levels as well as holding back growth in average room rates.

Cairns will sustain a slight increase in occupancies to 57.3 per cent for 2011 but at a slightly softer rate of $117.

The CBD business market is one of the few positives amid an otherwise “distressed landscape’’ for Australia’s $94 billion tourism industry, Mr Smits said.

While the overall future performance of the Australian market might appear strong in comparison to historical results, it still hid a pronounced performance dichotomy between the core CBD markets and regional hotel and resort properties, he said.

Depressed markets and a high Australian dollar were expected to remain the reality for the tourism and hospitality industry.

“Higher exchange and interest rates influenced by the commodities boom, combined with global economic uncertainty, have played havoc with a number of Australian industries, most notably the tourism sector,” Mr Smits said.

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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