Melbourne is experiencing an impressive wave of new hotel development on the back of surging demand in the overseas visitor market. In total, Urban.com.au’s development database show’s 51 new hotel and accommodation projects are in the pipeline, including eight new hotels currently under construction and 24 approved and ready to go.
Signalling Melbourne’s growing appeal, four new international luxury hotel brands are set to check into the Melbourne market over the next few years. Together, these brands will supply an additional 1500+ luxury suites to the luxury end of the market.
On the western end of the CBD, the Ritz-Carlton is under construction as part of the West Side Place development on the corner of Spencer and Lonsdale Streets, adding 250 eagle-eyed suites to the market.
Nearby, the Mandarin-Oriental h has checked in to anchor the hotel component of 600 Collins St, near Southern Cross Station. This striking tower is one of the last designs to come out of the practice of Pritzker Prize-winning architect Zaha Hadid, highlighting design as one factor in attracting well-heeled clientele.
Meanwhile, on the northern edge of the CBD, developer SP Setia is gearing up to progress their daring twin-tower project which will house 500 luxury suites for the Shangri-la brand. The hotel will take advantage of the development’s signature feature; a swooping sky-bridge linking the two towers at levels 49 and 50, offering uninterrupted panoramic views across northern Melbourne and the World-Heritage listed Royal Exhibition Building and Carlton Gardens.
Some of the Tallest Buildings in Australia.
Height is a factor common to these luxury projects and the fourth project rounding out this crop of new luxury brands, Crown Resort’s One Queensbridge Street, towers over all others . Located on Southbank, the hotel is accommodated within the 323-metre (equivalent to 90 floors) form of One Queensbridge, putting it amongst the tallest buildings in Australia.
One Queensbridge, like the other projects, employs a dual residential and hospitality programme. At completion, it will provide another 400 luxury suites and truly embrace its height, offering a roof-top ‘conservatory’ and sky bar that will surely rival the Shangri-la for dramatic and expansive views; a unique selling point for its well-heeled clientele.
Reinforcing the extent of Melbourne’s ongoing development, nearby Melbourne Square will supply an additional 600 suites, while the Windsor Hotel on the eastern edge of the Hoddle Grid rounds out the luxury list, with a 120-metre addition to the significant heritage site.
According to the Urban.com.au property database, in October of 2017 the database was tracking approximately 9,500 new hotel suites at various stages in the approvals and construction pipeline. Of these, 17% or 1600 were under construction, and 62% or 5,900 were approved, committed to by an operator, and awaiting construction.
10,000 Hotel Rooms in the Development Pipeline
For example, a hotel-only tower at 399 Little Lonsdale St will soon open, adding 478 affordable suites to the CBD market, split between hoteliers Ibis and Novotel. As there are 31,700 nightly rooms available in Metropolitan Melbourne as of the March quarter all the way back in 2016 according to official government figures,that means the near 10,000 rooms in the development pipeline will certainly make their presence on the size and shape of the accommodation market in Melbourne.
Sustaining this level of expansion is a twin story of domestic visitors and Chinese spending. Already, Melbourne leads the country in domestic overnight visitor spend according to Tourism Research Australia, registering $7.7 billion outlaid into the city economy, up 4.5% year on year, ahead of Sydney at $7.4 billion.
As Sydney recorded 9.95 million domestic overnight visitors in this same period to Melbourne’s 9.2 million, it’s clear that the varied attractions of Melbourne, like its famous laneways, shopping, and fully-stocked cultural calendar, together with its legible layout and easy surface transport make the city a dynamo within the domestic tourism market.
Asian-led Tourism Growth
The true story behind this expansion, however, lies with Asian tourism and spending, especially from China. In the period March 2017 to March 2018, Chinese spending in the Victorian tourism industry grew by 13.9% to $2.7 billion, with visitor numbers from the massive nation increasing by 9.2% to 570,000.
Chinese visitors accounted for half the total number of overseas visitors to Victoria, and their spend of $2.7 billion by itself accounted for 35% of the total overseas expenditure of $7.6 billion. In fact, in the next year or two, tourism expenditure by the Chinese visitors in the state will displace NSW as Victoria’s second largest source of tourism spending after Victorians’ own tourism spend in their state.
Across the Victorian tourism market, Asian-led growth offset declines in numbers and spending from western nations. For example, Indian expenditure in the state grew by a staggering 22%, but off a much lower base, and indeed all major Asian nations recorded significant increases.
Given Chinese spending easily surpasses the next three countries’ spends combined (New Zealand, Malaysia and India), it’s clear that Melbourne’s hotel sector plays to both the large domestic market, and the rapidly growing Chinese market.
More than the CBD
To tie this story off, although the CBD & surrounds accounts for most of the upcoming hotel supply, if we refer once more to the Urban.com.au database, it highlights that approximately 20% of new supply is outside the epicentre of Melbourne.
Perhaps unsurprisingly given its large Chinese community, Box Hill in the City of Whitehorse leads the way for these suburban centres, with 450 suites in development as of the last count, most likely catering to the “Visiting Friends and Relatives” section of the market.
The Urban.com.au’s development database shows hotel development across Metropolitan Melbourne. Outside the city centre, South Yarra is a near-CBD satellite with proximity to famous shopping districts, St Kilda is a significant tourism destination, and near-Monash sites acknowledge the significant education and research cluster there.
These projects underline the extent of tourism demand growth in Australia, especially in Sydney and Melbourne. In fact, away from the glitz and glam of these headline towers, all segments of the hotel accommodation market are seeing record amounts of new supply coming online.
* Main Photo: Tyrian Service Apartments