It seems probable Australia hotel asset class will become favourable alternative assets in ‘23 with returning strong occupancy trend, record breaking ADR across all states and historic highs for RevPAR in most capital cities.
For some hotels, increasing operational performance will offset cost of capital and offer significant uplift when rates subside. Growing performance coupled with cap rate discovery due to rate hikes marks an interesting environment for the space in ’23.
Coupled with room inventory data trends can be clearly spotted with certain locations offering investors strong uplift opportunities and greater margin of safety. (See our analysis on accommodation inventory and pipeline outlook for specifics).
Australia’s visitor economy is experiencing strong recovery. Domestic demand drove most of the growth previously, with healthy levels of occupancy returning and record ADRs. Closing the International tourism growth gap to‘19 levels and of particular China’s reopening, will be the source of 2023’s growth potential.
In our opinion we see occupancies rising but to still be below ’19 level with domestic travel flattening out, but increase in international short term visitors. We also see ADR flattening having gained from the sharp rise in 2022. As the macro economy stabilizers, we look to a more optimistic ’24, ’25.
All views are the opinion of author (Charles Man), and is not to be taken as financial advice.
All research and charts by Charles Man. Please ask for permission for re-use. All raw data from STA, STR, core logic and individual state's official tourism statistics websites.
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