Australia's hotel markets have recorded the highest Average Daily Rate results on record, according to Jones Lang LaSalle Hotels, the newly released Australian Bureau of Statistics (ABS) tourist accommodation performance data for the March quarter 2006 indicates that following a 4.7% increase in ADR to $123, hotels around Australia also recorded their highest ever average RevPAR (Revenue Per Available Room) result of $78.73.
"Almost all major markets recorded RevPAR growth with six markets achieving growth in excess of 9.0%," said Mr Anthony Corbett, Senior Vice President, Jones Lang LaSalle Hotels. During the March quarter 2006 Adelaide recorded the highest RevPAR growth of 21.0%, with Perth (16.7%), Canberra (11.8%), Melbourne (10.5%), Brisbane (9.4%) and Hobart (9.1%) following suit.
"With Australia-wide occupancies remaining relatively flat at 64.2%, the record RevPAR result was boosted by strong rate growth in the major markets such as Melbourne and Brisbane," said Mr Michael Clarke, Senior Vice President, Jones Lang LaSalle Hotels. As demand growth (room nights occupied) dropped below 3.5% for the first time since 2002 and international arrivals declined slightly by 0.8% for the year to date May 2006, pressure is mounting for hoteliers to continue this momentum.
Whilst Sydney recorded a drop in occupancy levels (-5.7%), this was coming off a very strong March 2005 quarter when the city played host to a number of large incentive conferences. "Relatively soft demand growth, coupled with the reopening of Hilton Sydney in July 2005 may have also had an effect on Sydney's hotel market," said Mr Corbett. He added, "Sydney would however benefit from having a government backed tourism infrastructure and events plan, which may also attract a larger portion of the lucrative conference market." Occupancies are expected to remain in the high 70% range, as demand growth largely keeps pace with only modest increases in supply. "In turn, operators have an opportunity to achieve consistent and significant rate growth," said Mr Corbett.
Hosting the 2006 Commonwealth Games helped Melbourne to record a 12.5% increase in ADR, pushing room rates to their highest level on record at $160.24 and also in turn boosting RevPAR by 10.5%. "Whilst high room rates were achieved, demand growth was quite soft during the March quarter 2006 increasing by only 1.7%," said Mr Corbett. He added, "When combined with an increase in supply with new hotels that opened for the Games, the result was a slight softening in occupancies during the quarter. Nevertheless, we expect further improvements in Melbourne over the balance of 2006."
"The Brisbane hotel market recorded another stellar performance in what is typically the softest quarter for the city," said Mr Clarke. A strong 10.3% increase in demand pushed occupancy to 75.6% during the March quarter 2006. Mr Clarke added, "ADR also increased 6.7% to $125.21 in the quarter – the best March quarterly result on record."
Slow demand growth continues to hamper the Cairns hotel market. "However, good increases in ADR pushed RevPAR to levels not previously achieved during a March quarter," said Mr Clarke. Further supply additions in the form of serviced apartments are expected to have an impact on occupancy levels in this market. Mr Clarke added,"We predict that the higher standard of product will see rate growth continue to increase by approximately 3.0% per annum."
The Gold Coast hotel market also recorded its highest March quarterly results on record for both ADR and RevPAR, however occupancy performance remains lacklustre. "Whilst this is a fantastic result for the local market, there are over 400 rooms / apartments under construction and due to open through 2006 - increasing Gold Coast room supply by 3.4%," said Mr Clarke. He added, "As a result, we expect accommodation trading performance on the Gold Coast to remain relatively flat over the next few years."
Perth continues to go from strength to strength. "Perth Airport has achieved record throughput each month during 2006, mainly boosted by the popularity of the region as well as business demand generated from the resources boom," said Mr Corbett. With limited new supply and strong demand growth of 7.1%, ADR increased 9.4% during the March quarter 2006 to $110. "Perth has suffered from flat rate growth for many years and only now are we seeing a return to the level that was recorded in 1995/6," added Mr Corbett.
Topping the hotel trading performance chart was the city of Adelaide which achieved its highest occupancy level ever during the March quarter 2006 at 78.6%. "Coupled with strong ADR growth of 10.7% the city benefited from a number of major events during the March quarter 2006 such as the Clipsal 500 V8 Supercar Race and Adelaide Fringe Festival, reportedly attracting unprecedented levels of visitation," said Mr Corbett.
"Whilst domestic tourism numbers remain under pressure following the recent spike in fuel prices and concerns regarding discretionary expenditure, Jones Lang LaSalle Hotels expects most key markets around Australia to achieve further growth in room yields," said Mr Corbett. Mr Clarke added, "With traditional style hotel development in most markets in Australia still not viable, we expect most markets to achieve RevPAR growth before the start of the next supply cycle."
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