Melbourne hotel room surge keeps a lid on occupancy rates

Melbourne’s hospitality sector is fast recovering from the Covid pandemic with hotels reporting average room occupancies of more than 61 per cent in June.

Melbourne’s hospitality sector is fast recovering from the Covid pandemic with hotels reporting average room occupancies of more than 61 per cent in June, but growth has been muted by the thousands of new hotel rooms hitting the city.

A further 10 hotels are under construction in the southern capital, which produced average daily room rates of $210 a night in June, according to just released data from the hospitality analytics firm STR, an increase of $42 a room a night on 2019 figures.

However, the result is still well down on the 2019 comparable when Melbourne room occupancies were a healthy 72.2 per cent.

“When looking at daily data, Melbourne hotels saw 29 days of occupancy levels above 50 per cent,” STR said in a statement.

“While demand continues to strengthen each month, occupancy growth has been slightly muted due to increases in supply,” it added.

Melbourne’s Hotel Lindrum was sold by Sydney tycoon Robert Magid to developer Time & Place for $50m.

JLL Hotels managing director and head of investment sales, Peter Harper, said demand for Melbourne hotel accommodation was recovering exceptionally well, with the city’s calendar of events back in force and the corporate market also back.

“The meetings, incentives, conventions and events (MICE) business is also coming back quicker than expected,” Mr Harper said.

“However, the reality is the market has had to absorb the opening of several thousand hotel rooms over the past 24 months and there are 10 or so hotels under construction at the moment.

“What we have seen year to date is that the cream rises to the top and the best-presented hotels in the best locations are trading strongly.”

Mr Harper added that transaction activity had been somewhat limited in Melbourne in recent times, and given the city’s historical stature most investors would want to retain strategic holdings.

“However, there is no doubt some owners are or will be reassessing their positions,” he said.

Some hotels such as the iconic Hotel Lindrum in Flinders Place and Bayview on the Park had been sold in recent months to groups that would pursue alternative uses, and it was understood the sale of Bayview Eden on Queens Rd, Melbourne, was well progressed, Mr Harper said.

JLL sold the Bayview on the Park hotel located at 50-52 Queens Rd in one of the largest inner-city land deals last year.

The hotel site will make way for a major build-to-rent project with more than 300 rental units.

Melbourne’s Hotel Lindrum, sold by Sydney tycoon Robert Magid to developer Time & Place for $50m, will review the plans for the hotel and may include an office element.