A year of many challenges for Australia’s hotel and tourism sector saw hotel performance flat line in the last quarter of 2008 as the impact of the global financial crisis became apparent, the newly released Australian Bureau of Statistics accommodation data shows. During the December quarter Australia’s accommodation establishments experienced flat demand growth which was unable to offset a modest increase in supply, causing occupancy levels to slip marginally by 2.5% to 65.1%. This, combined with a minor increase in ADR (average daily rate) of 2.8% resulted in RevPAR growth of just 0.2%, relative to the same quarter in 2007.
“Overall, it wasn’t the final quarter that most markets needed,” said Troy Craig, executive vice president, Jones Lang LaSalle Hotels.
He added, “In the first half of the year, leisure tourism suffered, with the high Australian dollar that contributed to surging outbound travel together with poor weather during the summer months – a double whammy particularly for Australia’s resort markets.”
In the second half of the year, the deepening of the global financial crisis following the collapse of Lehman Brothers in September 2008 saw many finance related companies start to tighten their belts restricting corporate travel and cancelling meetings and incentive travel.
In 2008 Perth continued to be the shining light in the Australian hotel industry. “The Perth market experienced RevPAR growth of 19.2% for the year which was solely driven by a similar increase in ADR,” said Mr Craig. Accommodation managers have used the solid occupancy platform of 82.3% to make hay while the sun shines and continue to drive rates hard. The same cannot be said for Sydney where occupancy levels also finished the year above 80% but rates recorded a lacklustre 3% gain.
“Darwin was the only other market to record double digit RevPAR growth, which similar to Perth was primarily a result of strong ADR increases,” said Mr Durran. A number of key infrastructure and mining projects in the top end of the Northern Territory has provided sufficient demand to absorb a substantial 7.8% increase in new room supply throughout the year.
Australia’s three largest resort markets of Gold Coast, Sunshine Coast and Cairns all experienced negative RevPAR growth of -1.5%, -1.9% and -9.3% respectively. “More so than the other markets, Cairns felt the full force of a strong Australian dollar in the first half, surging outbound tourism and weaker inbound tourism, exacerbated by the cancellation of a number of Qantas flights to/from Japan,” said Mr Craig. He added, “In Cairns, ADR levels remained comparable to 2007 suggesting hoteliers had adopted a revenue management strategy and sacrificed lower yielding business such as aircrew and wholesale accounts.”
With Queensland’s tourism minister recently commissioning two independent reports into how the Cairns region can better position itself to become a more sustainable tourism market, there may be strong upside ahead if positive measures are taken as a result of the recommendations.
The other major corporate markets all recorded positive RevPAR growth, from Canberra at 8.5% to Sydney at 1.6%. “These positive results have largely been driven by limited supply additions in most markets and generally only minor decreases in occupancy, allowing reasonable rate increases in all markets,” said Mr Durran.
Despite the somewhat mixed results across every market, one positive for hotel owners is that with limited supply additions across Australia, downward pressure on hotel trading in the short term will come from the demand-side and therefore the impact should be short lived. Industry attention will now turn to the Easter school holiday period as a likely indicator for the strength of domestic tourism through 2009 and the extent to which Australian families choose to holiday at home.