In our opinion, the combined trend of lower short term rental accommodation stock (e.g. Airbnb) due to rising residential yields, and low incoming supply of new economy, midscale and upper midscale hotel projects in ’23-’26 pose relatively low risk across all major cities (except Melbourne) for hotel owners / investors in these respective classes. This also takes into consideration a possible flattening of ADR, RevPAR and occupancy growth due to unstable economic conditions as favourable towards the economy to upper midscale classes as “revenge travel / excessive spending” may subside. Moreover traditionally, hotels in this class range also offer the highest cap.
In regards to upscale to luxury class, a moderate risk environment ensues from the majority of confirmed upcoming developments catering towards these higher tiers, but there is a possible slight mitigation effect contributed by considerable drops in STRA stock ’21-’22.
Comparatively, Melbourne is the city with considerable risks with the highest upcoming supply and highest % by far of STRA relative to hotel inventory of the capital cities. Brisbane / Gold Coast poses highest margin of safety with the cumulative effect of dropping STRA, moderate capped incoming supply, Queens Wharf Development and Olympics 2032 effect, with North QLD also attractive due to significantly higher cap rates. The most tangible risk in Brisbane being the upper upscale and luxury tier concentrated in CBD region, as all the new supply is in that small radius of development. Sydney, Darwin, Perth, Canberra will experience only a low to moderate increase in hotel room supply throughout ’23-’26 and have all low STRA stock as % of hotel room supply. In our opinion, Adelaide would pose slightly higher risk with a 10%+ supply increase upcoming ’23 - ’26.
In totality the effect of return of China travellers is yet to be seen with current data but is forecasted to have significant positive effect.
All Research and Charts by Charles Man. Please ask for permission if re-use. All raw data sourced from STA, STR, corelogic and inidividual states' official tourism statistics website.
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