Due to escalating construction costs, rising cost of capital and investor appetite due to current macroeconomic environment, a total of 17,710 rooms (chart 9) is expected to be delivered equating to a 10.1% increase in supply.
This takes into account those built in ’22 (3,420 rooms) and proposed but not confirmed projects (4,638 rooms). 2022 (chart 11) saw the opening of 3,400 rooms with Melbourne opening 11 new hotels, Sydney 4 hotels, Gold Coast 2 Brisbane 1 and Canberra 1 new hotel.
Diving into the effect (chart 8) of supply increase by year, 2023 sees the biggest increase in supply with 5,949 rooms to be delivered equating to 3.49% increase in supply and 2024 with 4,681 rooms expected equating to 2.75% of supply.
It is to be noted (chart 10) that the majority of supply is luxury and upper upscale projects with only 3 projects to be expected in the midscale and economy range – Tribe Hotel in Melbourne in 2024, 187 rooms, a private branded hotel coming to Perth in 2024 with 66 rooms and just one economy project expected throughout Australia, the Ausoted by Argyle with 71 rooms in Perth. The upcoming supply also matches the current trend of increasing RevPar and ADR.
Region by region, Melbourne is the most at risk of oversupply. Accounting for ’22-’26 including proposed projects, 51% of the overall of upcoming new supply of Australian hotel rooms are from Melbourne. Looking forward from ’23-’26, Melbourne has 12 new confirmed projects to be delivered translating to 2,836 more new hotel rooms which is 33.88% of the total of upcoming confirmed new hotel rooms across Australia ’23-’26. Including proposed projects, that is 5,069 new rooms coming to Melbourne ’23-’26 which is a 12.9% increase in rooms supply across Melbourne. This is alarming as Melbourne also has the largest (as % of hotel inventory) STR accommodation with 18,629 STR accommodations which is actually 47.34% of hotel room supply. All other capital cities, STR accommodation accounts for less than 25% of hotel room supply.
Sydney however, sees 9 new projects (upper midscale to luxury class) confirmed to be delivered in ’23-’26 adding 2,791 new rooms which translates to an increase in hotel room supply by 6.1%. Brisbane sees 5 projects (upscale to luxury class) all delivered across the luxury Queens Wharf developments with 1,420 expected to be delivered ’23-’26 which is approximately 7% increase in room supply. Gold Coast only sees a 1.5% increase in supply with coming 3 projects confirmed in ’23-’26. Also to be noted is Adelaide which although it only has 4 confirmed projects coming ’23-’26 (+993 rooms), that is already a 10.2% increase to the current supply. For Canberra, Darwin, Perth and Hobart, we do not see the upcoming supply as disrupting the current status of hotel performance.
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., chart 10 data from CBRE, chart 11 from Colliers.
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