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News release

Brisbane

Brisbane hotels demand up but outpaced by supply

Confidence has moderated… but there are positive signs


While Gold Coast and Cairns hotels are basking in the sun with improved occupancy, average daily rate and RevPAR in 2015, Brisbane has experienced softer trading conditions with both occupancy and average daily rate down on last year for the first quarter of 2015.  However, owners and operators can take heart and perhaps breathe some relief that improved demand is evident across the market.

"While currently outpaced by supply, it is certainly worthwhile noting that demand overall has been trending up." Julian Whiston, Executive Vice President – Strategic Advisory, Hotels & Hospitality Group said.

JLL note that room nights sold increased by 8.4% year on year by the end of the first quarter, with room revenues increasing across the Brisbane accommodation market by 6.0% for the same period.

"The volume of rooms sold has risen and we are hopeful that this will be a medium term characteristic for the market. However, with more supply in the pipeline a significant improvement to the short-term trading environment will be moderated."

As surge in supply was experienced during the last 12 months, additions to the Brisbane market includes the Four Points by Sheraton (246 rooms), NEXT Hotel (304 rooms) and the extended and refurbished Inchcolm Hotel (50 Rooms). Furthermore, the first TRYP by Wyndham Hotel (65 Rooms) and the Alpha Mosaic Hotel (51 rooms) opened in Fortitude Valley.

Last month, the new Capri by Frasers, located on Albert Street in the CBD, open its doors to guests, offering 239 rooms including 174 deluxe studios.

"Despite the current soft trading conditions, investor interest remains healthy. Brisbane remains a strategic market to cover off both as an investor and operator. As a market that has traditionally been tightly held by its owners, we do anticipate that sentiment towards the sector has the potential to follow a similar growth trend to Sydney and Melbourne albeit a little more tempered." Mr Whiston said.

In terms of the broader Queensland market, Mr Whiston comments that Queensland's core leisure markets have been earmarked by domestic and Asian investors, underlining this is the increasing tourism demand that continues to emerge from Asia.

The latest ABS tourism figures back up JLL's position with regards to overseas visitors targeting Australia.

International visitor arrivals to Australia totalled 4.5 million as at YTD September 2014 representing an increase of 8.6% year-on-year, with 2014 set to record the highest number of international visitors ever recorded at its current pace.

The strongest growth was recorded in visitation from Thailand, Indonesia, Hong Kong, Germany and Mainland China, with the latter being the largest source market accounting for 15.8% of all international visitor nights over the period.

The primary purpose of visit to Australia is for holiday/pleasure with this segment accounting for just under one third of total visitor nights in the period. Growth in this segment has been strongest for the purposes of convention and visiting friends and relatives (VFR), which increased by 18.6% and 14.1% respectively.

Queensland's core leisure markets, such as the Gold Coast and Cairns, have been significant beneficiaries of both international and domestic tourism increases.  This is certainly evident in the hotel property sector which has seen solid improvements.

Year on year, Gold Coast hotels experienced a 9.4% rise in RevPAR as a result of an increase of 5.2% in ADR and  4.0% growth in occupancy at the end of the first quarter of 2015.  Across the same period, Cairns has proved equally attractive to the leisure traveller demonstrating a 13.6% rise in RevPAR, an outcome of an increase of 3.6% in ADR and a 9.6% growth in occupancy.

"Gold Coast and Cairns are considered Queensland's core leisure markets with significant domestic and international draw. These markets are also a pertinent barometer for the wider trend in terms of leisure travel. This growth story is also no doubt reflected across other key markets including the Sunshine Coast as well the State's island resort offerings." David Marriott, Senior Vice President - Strategic Advisory, Hotels & Hospitality Group, said.

"We expect this growth trend to continue across Queensland's leisure markets. This is likely to be most evident on the Gold Coast which benefits from ease of access, new infrastructure development and the potential benefits that may come from the lead up to and the hosting of the Commonwealth Games in 2018." Mr Marriott observed.

"The dynamic nature of the Gold Coast market, and its tendency to move rapidly on perceived opportunities, indicates that demand increases are likely to be addressed relatively quickly through new hotel development along with absorption of residential stock into the accommodation pool.