In welcome news for the hotel sector, industry analysts and recent job figures signal more than a glimmer of hope on the horizon. Firstly, analysts are forecasting pent-up consumer demand for travel to drive a life-injecting spending spree into Australian tourism, while secondly, job figures show ads for workers in the hospitality sector higher than any other.

Hotel and tourism industries worldwide suffered unprecedented decline due to the pandemic. In Australia, trading dived in the first four months of this year, Colliers International analysis of STR Global figures showing the decline caused primarily by falling occupancy rates in April. These declines ranged from -14.6 per cent in Perth to close to -40 per cent on the Gold Coast compared to the month-on-month rolling average. In Sydney and Melbourne, the decline was driven more by the fall in room rates as hotels turned their properties over for quarantining of overseas travellers for far lower than average compared to first quarter prices.

But the light at the end of the pandemic tunnel has now been switched on by the potential for “revenge travel”, said Colliers International director of hotels Karen Wales.

“Revenge spending is a term which was coined to describe pent-up Chinese consumer demand in the 1980s that was unleashed after the chaos and poverty of the Cultural Revolution,” Ms Wales said. “Here there is the anticipation of revenge travel over the next six months to the end of the year prior to the opening up of international borders.

“Every Australian who’s been stuck in isolation has probably quaran-dreamed about the places they’ll go… and with many investors expecting the domestic leisure segment to lead the recovery hoteliers are hoping for a swift turnaround when we finally elbow the coronavirus goodbye.”

Bounce back

Colliers International’s head of hotels, Gus Moors, also points to the significantly strong bounce back that occurred within the accommodation market following the 2003 SARS outbreak, a recovery brought about by the daily dynamic of room rate pricing. “This could move up quickly as demand recovers,” Mr Moors said.

Supporting the forecasts is Colliers’ analysis of booking data for the month of May from leading guest acquisition software platform SiteMinder. This shows Australia and New Zealand leading the world in hotel bookings, with Australia’s volume of hotel bookings having risen through May to be at one third of the level recorded by May 23 last year. The biggest spike was in Canberra up from 15.07% of 2019 levels at the start of the month to 32.76% by May 23 this year “representing a very strong trajectory” according to Ms Wales. 

“Similarly, Gold Coast and Adelaide both experienced a doubling in hotel bookings over the month of May,” Ms Wales said. “Perth continues to outperform, but Sydney also showed impressive pick up over the past week, far outpacing the growth in Melbourne and Brisbane.”

When it comes to job data, figures are still down compared to the same time last year. However the month-on-month numbers show promise. Month-on-month growth in jobs advertised is up 40 per cent across the board yet in hospitality and tourism month-on-month job ads are up highest of all at 138 per cent.  

‘Green shoots’ of recovery

The statistics are in line with findings from Colliers International’s recent Australian Hotel Investor Sentiment survey where investors stated they believed ‘the green shoots of recovery’ would emerge in H1 2021. The survey also showed Canberra and Brisbane under pinning the first fresh growth in domestic leisure travel.

A willingness to buy rather than build was also indicated by investors surveyed. “Although the majority of investors are adopting a 'wait and see approach' to hotel investments over the next six months, almost one third of investors say their primary investment activity will be to 'buy',” Ms Wales said. “This shows us that the Australian hotel transaction market is expected to heat up towards the end of 2020. While Australia's hotel development cycle has been in full swing over the past couple of years, investors have signalled a significant change in strategy with 'build' intentions the lowest across all Australian markets averaging only 3.9 per cent.”

One of the most positive signs for the industry was this month’s announcement of an 120-room Westin Hotel planned for Margaret River in West Australia. The region’s first five star hotel, it will be a joint development between Saracen Properties and fund manager Security Capital Australia after a deal Negotiated by CBRE was struck with international hotel chain Marriott. The $70 million resort is expected to open in mid-2023 with construction creating around 300 jobs.

Ultimately it will be a slow road to recovery for owners, operators, financiers and governments said Mr Moors. Yet optimism prevails.

 “Investors expect Q3 2020 to be the weakest quarter for hotel trading in Australia with sentiment for negative trading averaging -79.4 per cent,” Mr Moors said. 

“As some Australian states and territories begin to cautiously relax social distancing measures, investors remain optimistic that 2022 will see strong performance across all geographies and segments.”