Hotel building boom takes bite out of Melbourne room rates
Room rates in Melbourne’s aggressively expanding hotel market have declined over the past two months due to the increase in hotel stock and the high quality of Airbnb stock located near the CBD.
The recent opening of the 317-room Melbourne Convention and Exhibition Centre Novotel, which is expected to be followed by the launch of the IBIS Melbourne that will add another 270 rooms to the city’s supply and the Novotel Little Lonsdale which has 213 rooms and is due to open later this year, appears to be is contributing to the decline in room rate growth.
Research from Citi and STR reveals Melbourne hotels’ revenue per available room rates dropped 0.3% for the second consecutive month, following a 0.9% drop in June compared to June 2017.
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But not all hotel analysts are convinced that Melbourne will lose investment traction following the big increase in hotel stock and Airbnb activity.
“We have seen no decline in interest in acquiring hotels in Melbourne or developing them,” Ashurt partner John Stawyskyj says.
“Clients continue to be interested in Melbourne as an investment destination which may belie those figures.
“The long-term prospects for Melbourne are relatively strong and the Melbourne market has shown good resilience over the past few years and can absorb new stock,” adds Mr Stawyskyj, who is moderating a session on the global search for hotel opportunities at the international Hotel Investment World conference next week.
Jones Lang LaSalle Hotels executive vice-president Peter Harper says that, looking at the Melbourne market as a whole, it continues to trade at an exceptionally high occupancy rate and commands the second-highest average daily rate of all capital city markets after Sydney.
“Melbourne has witnessed six major hotel transactions in the past two years and all but one of them was undertaken by offshore capital, which shows how strongly the market is viewed among the global investment community,’’ Harper says.
Meanwhile, Citi says the slowdown in Australian tourism continues with growth in short-term visitor arrivals during May sitting at 5%, which is well below the trend of 6% growth for the second consecutive month. However, outbound tourism departures increased 5 per cent in May, which is above the average growth.
“We see the continuation of above-trend growth in outbound tourism and slowdown in inbound tourism during May 2018 from the March-April period as unfavourable for companies exposed to Australian tourism.”
Apart from the influx of Accor-branded hotel openings, Hong Kong’s venerable Mandarin Oriental group plans a luxury hotel for Collins St that was designed by the late Iranian architect Zaha Hadid.
This article originally appeared on www.theaustralian.com.au/property.
