Covid reopening revival is over and Chinese tourists missing but hotel rooms earn a premium

The Kimpton Margot in Sydney’s Pitt St.

After gaining ground as the economy reopened from Covid, Sydney hotel occupancies are starting to slip – however hoteliers are pocketing higher room rates than they were achieving before the pandemic hit.

Despite a plethora of hotel openings such as the Kimpton Margot in Sydney’s Pitt St, and the ACE Hotel in nearby Surry Hills, new STR data reveals that in June the average occupancy rate for Sydney hotels was 67.4 per cent and by July had dropped to 65.8 per cent.

Average daily rates in July were $239.96 and revenue per available room was $157.80, which is higher than the 2019 comparables of $197.41 and $154.71.

“Occupancy, however, was 16.1 per cent below July 2019,” STR said.

HTL Property managing director Andrew Jolliffe said the drop in occupancy at Sydney hotels could be attributed to the loss of the Chinese inbound tourism market.

“That’s a big sector; that is one of the key reasons,” he said.

“The other reason, which is not as influential but is a fact, is that the domestic tourism market is not as big as it once was. At the first opportunity, the domestic market has headed overseas in greater numbers than it did prior to Covid.”

Sydney hotelier Jerry Schwartz said it was not a huge drop and it had been countered by the higher average daily room rates, which exceeded pre-Covid levels.

“It’s pleasing to see we have high average daily room rates. These (winter months) are the worst months, but as spring and summer comes occupancies usually will increase,” said Dr Schwartz, who owns 14 hotels on the eastern seaboard – six of them in Sydney.

He does not believe high volumes of Chinese tourists will return for quite a long time, at least until next year. But when they return the volumes would be high and he expected occupancies in Sydney hotels to be so strong that guests would be turned away.

“These average room rate rises indicate we are in for good times,” he said.

However, Dr Schwartz said he was not currently planning to buy more hotels. “I need to consolidate and get over the debts from Covid,” he said.

Dr Schwartz said that his regional hotels were doing a lot better than his Sydney hotels – particularly his properties in the NSW Hunter Valley, Gold Coast, and his Fairmont Hotel in the Blue Mountains.

“We have never seen such strength in the market,” he said.

JLL Hotels executive vice-president Ross Beardsell said the softening of occupancy rates was due to increased numbers of Covid and flu cases and the postponement of conferences and events.

“Companies and some government organisations have been postponing some events and are re-booking these events later in the year,” he said.