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Developers gearing up to build.
Tuesday, 11th December 2007
Source : Jones Lang LaSalle Hotels
The number of hotel rooms under construction or likely proposed has increased by 40% since March 2007,albeit off a small base.

According to Jones Lang LaSalle Hotels' most recent National Hotel Development Register, a significant uplift in the number of proposed projects in Australia's major markets has boosted the hotel development pipeline to over 6,000 rooms.

"Should all of these projects proceed, new room supply will increase existing stock on average by 2.6% per annum during the period to 2010, still well within acceptable ranges," said Mr David Gibson, CEO Asia Pacific, Jones Lang LaSalle Hotels.

"While the viability of new development remains a challenge, the continued demand for hotel accommodation and the positive outlook for future hotel trading performance is resulting in an increased level of hotel and serviced apartment development projects," said Mr Gibson.

As at the end of November 2007, there were 2,031 rooms under construction in Australia's ten major markets. This represents little change from our last survey in March 2007 with rooms under construction having increased by 8.7% or only 163 rooms. "However the number of likely proposed rooms (mooted in all markets) has increased by around 70% (1,665 rooms) and is now at the highest level since we started the Register in 2003," said Mr Gibson.

Melbourne is Australia's hotel development hot spot with 626 rooms currently under construction. "With Melbourne's long term success in generating demand growth, it has been the market with the most focus for new hotels," said Mr Gibson. The proposed new hotel at Crown Casino accounts for almost half of this proposed room stock for Melbourne.

Darwin's hotel market is expected to be the most significantly impacted with rooms under construction increasing existing stock by 17.4%. "The new convention centre and strong growth fundamentals are however likely to underpin the local market," said Mr Gibson.

There are currently no new rooms under construction in Adelaide, Brisbane, Cairns, Canberra and Hobart however this is expected to change with an increase in proposed projects over the medium term.

Adelaide will be impacted with 421 rooms or a 10.4% increase on existing stock if all proposed hotel developments progress. "Developers are confident that Adelaide may experience significant growth in accommodation demand as South Australia becomes the next beneficiary of the resources boom," said Mr Gibson.

The outlook for Sydney's hotel investment market is bright with only marginal increases to the city's room supply up to 2010. "Coupled with the positive inbound forecasts this bodes well for potential growth in hotel trading performance," said Mr Gibson.

Serviced apartment developments no longer dominate development activity with hotel developments accounting for 80% of rooms with significant projects mooted for Cairns, Melbourne and Adelaide. "With interest rates having increased during 2007 and expectations of more rises to come, serviced apartment pre-sales are expected to become harder to secure and one-line development may dominate activity for some time," said Mr Gibson.

While occupancy levels in major markets across Australia remain high at around 80%, in most cases room rates have not increased to a sufficient level to warrant new hotel room supply. "However with some markets recording double digit rate growth year-on-year and signs that this will continue unabated, the viability gap is expected to close over the next few years," said Ms Karen Wales, Vice President Research, Jones Lang LaSalle Hotels.

Tourism and hotel projects are tracked as they are proposed, under construction, completed or taken out of the market. Jones Lang LaSalle Hotels gathers information from press, local councils, tourism organisations, hotel operators, developers as well as local Jones Lang LaSalle offices. There are many more mooted projects than in the following table, but Jones Lang LaSalle Hotels only include those considered likely to commence construction over the next two to three years.
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