Australia Hotel Market Outlook Q4
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Australia Hotel Market Outlook Q4 Australia Hotel Market Outlook Q4 Document Transcript

  • Q4 2011Australian HotelMarket OutlookAuthorRutger SmitsConsultant
  • They don’t have their own currency or central bank, The Deloitte Australian Hotel Market Outlook so markets and policymakers can’t respond through – Q4 2011 reports on the performance of the a mix of low interest and exchange rates. As a result, Australian hotel industry to September 2011, investors fear defaults, and so demand high interest rates. based on data until the June 2011 quarter as And those rates make default more likely, meaning a published by the Australian Bureau of Statistics vicious cycle is developing – one that will affect banks too, (ABS), and extrapolated through information as they hold a lot of government debt. The risks are high: collected by STR Global. even if German taxpayers pay up there is still a chance the Euro goes kaput. Based on a correlation of this historic market performance with state-by-state indicators for Luckily, most global growth was coming from emerging sectoral performance as reported by Deloitte economies anyway. That means that, so far, the woes Access Economics, we also present a forecast for of Europe and the US are something of a blessing each market until year-end 2014. The economic in disguise. Yet although emerging economies can commentary providing the background for this boost their consumer and public spending in the event outlook is derived from the Deloitte Access of more rich-world troubles, that’s at best a partial Economics Business Outlook – September 2011. offset. The likes of China and India remain vulnerable to developments in the US and Europe, and their ability to Subscribe to Deloitte Access Economics keep growing strongly is limited by their inflation and publications online. by the size of their government deficits. The upshot is that global growth peaked in 2010 and, although we don’t expect a ‘financial crisis rerun’, growth may be GFC2: good or bad news? well below trend in 2011 and 2012. Never have the ‘two speeds’ of Australia’s economy The Australian economy been in greater evidence than over the past year. You know all about what is going wrong: horror Commodity booms are characterised by strength in headlines are smashing confidence, fearful families exchange and interest rates, and those effects have aren’t spending, stimulus spending has done its dash, been further magnified by the ‘recession’ gripping the housing construction recovery has turned to ashes, the rich world. In turn, the deadly duo of exchange and a series of sectors – with manufacturing, tourism and interest rate strength has played havoc with the and international education heading the list – are conditions faced by a number of Australian industries, increasingly failing to deal with what, until recently, most notably the tourism sector. was the relentless rise of the $A. Yet now the threat of a renewed global financial crisis is Mining remains the key driver of business investment playing out – could that be a sectoral saviour for tourism in Australia. Indeed, the latest private capex survey operators, international education and manufacturing? released by the Australian Bureau of Statistics suggests There is certainly some potential for that. After all, that most of the growth and more than half of the financial markets move very fast, so the potential for level of business investment expected to take place some pain to abate is clearly there. in 2011–12 is mining-related. Unfortunately, resource However, it may be a case of ‘be careful what you booms bring with them two side effects: the exchange wish for’. Were a renewed financial crisis to take hold rate goes up because commodity prices do the same, – not our central view, but a possibility – then some and interest rates go up as booming export earnings of the sectors in the firing line of current conditions lift national income and demand. That deadly duo could find themselves simply jumping out of the frying of strength in interest and exchange rates hurts the pan and into the fire. After all, the first global financial non-resource sectors. crisis generated the fastest ever recorded collapse in Interest rates Australian manufacturing output, so a second crisis We still see a possible rate rise – albeit not until 2012. wouldn’t exactly be all beer and skittles. We know that could be wrong and that you don’t The global economy: will Europe blow? think there will be a rate rise. Chances are you agree The self-inflicted wounds of Europe and the US are hurting with markets that times are tough and that rates will global growth, and could drive them back into recession. fall further. Yet although it’s true that times are tough The earlier US stimulus is subsiding, and the poor for many businesses and families, that has more to US debt deal includes cuts that arrive too early. do with the gaps in Australia’s ‘two speed economy’ In Europe, the main threat to the globe, debts in Greece, than it does with the average experience. We have many Ireland and Portugal will never be repaid by anything sectors doing poorly, but a handful of sectors that are other than German taxpayers as those nations are stuck really pumped up, with the business investment agenda in a common currency zone. in the resources sector jumping out of its skin.2
  • Hotel Market Outlook Q4/2011What looks likely to hold the miners back is a lack of supply Yet, interestingly, overall growth rates in consumerrather than any lack of demand. Indeed, skill shortages will spending are currently close to their longer termbe an ongoing story in the next few years, and those skill average. However, more of that is leaking to foreignshortages always carry inflation risks. Moreover, the trigger internet sales, and is also getting chewed up in thingsfor rate rises could be closer than you think in part because that the retailers don’t see, such as consumer spendingour productivity performance has been so pathetic. by Australians on higher rents and higher utilities charges, as well as on the increased consumptionThe path of interest rates from here is almost entirely on a range of services such as health.Europe driven. If Europe stumbles badly, the ReserveBank has shown that it is willing to respond rapidly Consumers have also been spooked by what isand could cut rates further. If not, then it may not happening in the headlines – nations in Europebe too long before rate rises are back on the agenda. seemingly on the brink of bankruptcy, US politiciansThe drum of underlying price pressures is still beating, who can’t agree on the time of day, and the highlyand while it is clear that the Reserve Bank is watching charged political debate here at home. So there is aglobal developments with eagle eyes, they may still risk that families will save more in the next little whileend up having to have to raise rates at some stage. because they’re scared rather than because higher interest rates will make them save more.Exchange ratesAt their simplest, exchange rates may be thought of as At the same time, changed regulations pulled therelative prices across nations. Australia’s relative price is rug out from underneath foreign student numbers.well above historic norms because so too are (1) prices Education earnings were down 13% through thefor the things we sell, especially industrial inputs to Asia course of last financial year as a result and – despite thesuch as coal and iron ore, and (2) the ‘price’ (interest useful response to the new Knight report – they remainrates) paid on Australian markets versus the interest rates under pressure given that the average lengthavailable in the hard hit economies of the rich world. of course (the ‘product cycle’ in education) is something like three years. That means the fallsThe clouds over Europe and the globe are big and black, in student starts are showing up gradually in overallbut the $A will continue to ride high while commodity education export earnings, implying that there’sprices and local interest rates do the same. And although more bad news ahead.there is no certainty about the direction of the next movein Australian rates, they don’t look likely to move much. That said, there are some responses underway, including to the Knight report – which provides a review of theThat said, the $A won’t touch the sky forever. In the Student Visa Program. For example, the Government isshort term, global developments will be the determinant. reducing the amount of money students must have inLooking a little longer term, interest rates will rise more the bank before coming to Australia, and will also allowabroad than here, while commodity prices will ease students to stay for work experience once they haveas global mineral supply starts to narrow the gap with completed their studies. That should help the outlook.galloping demand. Subject to those global caveats,these forecasts see the $A maintain some strength in the Economic impacts for the Tourism,coming year, before then gradually shedding some of the Hospitality & Leisure sectorexcess pounds it has put on in recent years. Hotels – particularly in the nation’s CBDs – have been doing pretty well of late. That is because business travelOutlook demand is up, and the gains on that front have beenFor now, our central view may be summarised as sufficiently strong to encourage operators to edge up their‘China’s strength dominates the bad news out of Europe room rates. Yet that is one of the few points of light amidand the US’, meaning that the sectoral landscape an otherwise distressed landscape for the tourism sector.should basically show more of the same – great growthpotential in engineering construction and in mining, The high flying $A has seen Australia take flight inwith spillover strength to business services, but worrying its wake, with the number of outbound Australiannews in most other industries. Such an industrial travellers doubling in the past seven years. Across thelandscape – with its big winners and many losers – same period, inbound travel is also up – but not bymay remain the dominant one for the moment. much, and the lingering weakness in tourist flows has led to the tourism sector not investing too much in newKey sectors rooms, facilities and better attractions.Those hardest hit by current conditions are Australianretailers, with their bricks and mortar offerings being The latest TTF-MasterCard Tourism Industryincreasingly shunned since the $A touched stratospheric Sentiment Survey reveals a continued downwardhighs and that strength has combined with advances in trend in tourism industry sentiment, with the moodonline technology to provide punters with cheap and of operators approaching the lows of the globalcheerful online alternatives compared to their spending financial crisis.patterns of the past. 3
  • Tourism operators are bracing for continued challenges, The Tourism Forecasting Committee (TFC) has recently with the exchange rate being an all-round threat, released the 2011 Forecast Issue. Finally recognising whilst many regional centres in particular are experiencing that reality is not quite following their predictions, a drain of labour from tourism and hospitality to the the outlook has now been substantially downgraded mining sector. For many, the strength of the $A has from the last forecast, with expectations for impacted the appeal of Australia as a tourism destination international arrivals curtailed for this year and next. and reinforces the need for effective marketing, support • Overall tourism consumption is forecast to decline for major events and new tourism product development. by 0.3 per cent in 2011 (had been expected to grow 0.4 per cent) On the bright side, the Federal Government has been busily trying to extend Australia’s bilateral aviation agreements • International visitor arrivals are now forecast to grow – including most recently one with China. That may yet just 0.4 per cent in 2011 (a downward revision from help with inflows of visitors. So too (over time) will the 3.1 per cent in previous forecast), with stronger rise of incomes in China and elsewhere among emerging growth from Asia (+3.2 per cent) offsetting declines economies. There will eventually be a major market among from markets outside Asia (–1.6 per cent) our neighbours. In the meantime, however, this is a sector • Domestic visitor nights are expected to decline which is clearly on the wrong side of the high interest and 0.3 per cent in 2011 (in line with previous forecast) exchange rates of recent times, and we don’t expect that its modest recovery of late will generate more momentum • Outbound departures will remain strong with in the near future. Although there is a brighter longer term 9.2 per cent growth (slightly lower than previous future ahead, and although the European crisis offers hope 10.1 per cent growth). of an early fall from grace of the $A, chances are many The tourist deficit is now expected to reach almost parts of recreation have to crawl through the charnel house 1.9 million by the end of the year (up from 700,000 of currency strength for a while longer yet. just two years ago) and will surpass 2 million in 2012. Visitor flow Australia HMO Q3 Slides.xlsx Whether you are in Disneyland or Dubai, Aussie accents 70.0% $200 are increasingly common as the pumped up $A allows 68.0% $180 Australians to venture forth from Down Under to 66.0% $160 foreign fields. We are doing so at a very rapid rate, 64.0% $140 and one that shows no sign of slowing growth. But that 62.0% $120 impact on imports has its flipside on exports. Although 60.0% $100 traveller numbers arriving into Australia have edged up 58.0% $80 of late, they remain little different to where they were 56.0% $60 five years ago. There will be big long term gains to 54.0% $40 52.0% $20 Australia’s tourism sector from rising incomes in Asia, 50.0% $0 but the early impact of that same phenomenon – the Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 rise of Asia – has been a matching rise in the $A which, Room Occ% trend (LHS) Room Occ% trend (LHS) Room RateRate trend (RHS) Room trend (RHS) RevPAR trend(RHS) RevPAR trend (RHS) despite a recent loss of altitude, has been keeping the Both our occupancy outlook as well as our average Australia world away from our doorstep. room rate projections for the last two years of the Whilst international tourism globally grew by 4.5% forecast period improved marginally, against a slightly in the first half of this year, international arrivals to more optimistic longer term economic outlook, Australia improved by only 0.8% in the first six months, and partly because of further delays in several new equivalent to an additional 22,000 travellers. hotel projects. However, whilst the overall future An additional 330,000 Australians left for foreign performance of the Australian market may appear shores however, reflective of an increase in strong in comparison to historic results, it still hides departures of 10.5% over the same period. a pronounced performance dichotomy between core 10,000,000 CBD markets and regional hotel and resort properties. 9,000,000 8,000,000 Overall, our RevPAR forecast for 2011 remains positive 7,000,000 with 6% growth over 2010 to $94. We have further 6,000,000 5,000,000 increased our occupancy outlook from 64.3% to 4,000,000 64.6%, along with a modest room rate improvement over our latest forecast, growing at 4.5% over 2010 3,000,000 2,000,000 1,000,000 to finish at $145 for the year. 0 -1,000,000 -2,000,000 Mar -83 Mar -84 Mar -85 Mar -86 Mar -87 Mar -88 Mar -89 Mar -90 Mar -91 Mar -92 Mar -93 Mar -94 Mar -95 Mar -96 Mar -97 Mar -98 Mar -99 Mar -00 Mar -01 Mar -02 Mar -03 Mar -04 Mar -05 Mar -06 Mar -07 Mar -08 Mar -09 Mar -10 Mar -11 Mar -12 Mar -13 Mar -14 Mar -15 Mar -16 Residents departing Tourists arriving Net tourist exchange Residents Departing Tourists Arriving Net Tourist Exchange4
  • Hotel Market Outlook Q4/2011 Our RevPAR forecast for 2012 is also revised upwards, Whilst Melbourne has seen more supply being added back to $101 from a previous downgrade to $99 in our right through the GFC than any other city, it remains a last forecast, driven by a slight improvement in room remarkably resilient market. occupancy to 65.2% and an extra $1,50 in the room Occupancy performance remains on track to achieve rate, to $154. 80% for 2011 with the year-end average room rate Sydney HMO Q3 Slides.xlsx projected at $181. This is a slightly softer rate than in90.0% $325 our previous forecast, but still 4.2% ahead of last year’s88.0% $300 result of $173. We believe more growth is yet to come86.0% $275 and our projection for 2012 is for room rates to reach close to $195, with room occupancy creeping further84.0% $25082.0% $22580.0% $200 up to 81.3%. This should see overall RevPAR growth78.0% $175 getting close to 10% for 2012.76.0% $15074.0% $125 Significant additions to new supply are not expected72.0% $100 until 2013, and even these should not dampen further70.0% $75 growth in both room occupancy and average room rate in subsequent years.68.0% $50 Sep-90 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Room Occ% Room Occ% trend (LHS) trend (LHS) Room Rate trend (RHS) (RHS) RevPAR trend (RHS) Brisbane Room Rate trend RevPAR trend (RHS) HMO Q3 Slides.xlsx Sydney continues to demonstrate strong demand for Sydney 86.0% $250 hotel rooms with room occupancies at record levels. 83.5% $225 We have revised our projections downward somewhat, 81.0% $200 however, as there are still some soft patches where 78.5% $175 occupancies are not quite as high as anticipated. 76.0% $150 Unfortunately, hoteliers still interpret this as a weakness 73.5% $125 71.0% $100 in demand and there is still some evidence of, in our 68.5% $75 view unnecessary, discounting in the market. 66.0% $50 The long-awaited opening of the 171-room The Darling 63.5% $25 at The Star in Darling Harbour added some spectacular 61.0% $0 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 and much needed new inventory to the market. Room Occ% Room Occ% (LHS) trend trend (LHS) Room Rate trend(RHS) Room Rate trend (RHS) RevPAR trend (RHS) RevPAR trend (RHS) Meriton added a further 247 rooms in their new Brisbane has always been ahead of the cycle in Brisbane Haymarket property. The next major addition of rooms comparison to other cities, and yet again seems will be the new 196-room QT project by Amalgamated the first to announce a bevy of new hotel projects. Holdings, expected in Q4 2012. Meriton is currently marketing some 150 one-bedroom Our current projections see room occupancy for 2011 units in its new Riverside Soleil project for short stays, finishing at 86% with an average room rate of $190, with the Infinity building on Herschel St expected to do up by $14 or 8% on 2010. The resultant RevPAR of the same when it opens in 2013. The new Emporium $163 is down by $2 on our previous forecast, but still project in Southbank is gathering pace, whilst a long 8.7% up on last year. awaited 368-room project on Elizabeth St should also Our further projections have softened somewhat as well, be announced soon, both expected to be completed by although room occupancies in the high 80’s are by no late 2013. A new 216-room project on Mary St ‘Felicity’ means soft, and should provide ample opportunity for could also open as soon as 2013. The proposed 5-star aggressive room rate growth, projected at 10.5% Tabcorp hotel over the State Library would add a further for 2012 and well above that for further years. 400 luxury rooms to the market, however, this would not likely be until 2015 at the earliest. Several other Melbourne HMO Q3 Slides.xlsx projects are in early planning stages.90.0% $32588.0% $300 Whilst the Brisbane market is currently performing very86.0% $275 well, against this flurry of activity our room occupancy84.0% $25082.0% $225 outlook has been revised downwards, though future80.0% $200 performance is by no means considered weak. Whilst we78.0% $175 have also softened our rate outlook, we still expect healthy76.0% $15074.0% $125 RevPAR growth, at 6.5% for 2011 and peaking in 2012 at72.0% $100 10.7% on the back of solid rate growth. From 2013 RevPAR70.0% $75 increases are less pronounced as new supply enters the68.0% $5066.0% $25 market, resulting in slightly lower room occupancy and less aggressive room rate increases. Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Room Occ% Room Occ% trend (LHS) trend (LHS) Room Rate Rate trend (RHS) Room trend (RHS) RevPAR trend (RHS) RevPAR trend (RHS) Melbourne 5
  • Perth Whilst not all projects may eventuate, we have included HMO Q3 Slides.xlsx 92.5% $325 four proposed projects in our forecasts: the conversion 90.0% $300 of the CML building by Adabco Pty Ltd and a proposed Medina Grand near the Treasury building, both in 87.5% $275 85.0% $250 82.5% $225 late 2013, as well as the proposed airport hotel; and a new hotel by the Hines Group, in Grenfell St, in 2014. 80.0% $200 77.5% $175 75.0% $150 72.5% $125 As a result of the above additions, room occupancies in 70.0% $100 Adelaide, which already show a declining trend, are likely to 67.5% $75 65.0% $50 drop further towards the latter part of our forecast period. 62.5% $25 We expect 2011 to finish at 73%, dropping to 72% in 2012 60.0% $0 and below 70% beyond 2012 as new supply enters the Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Room Occ% Occ% trend (LHS) Room trend (LHS) RoomRoom Rate trend (RHS) (RHS) Rate trend RevPAR trend (RHS) RevPAR trend (RHS) market. Average room rates should not decline, but will only show very modest growth, 1.6% in 2011 to $144 in As the main beneficiary of Australia’s resources boom, Perth 2011, growing to $148 in 2012 before potentially stagnating Perth hotels are yet again experiencing record room thereafter. We should caution, however, that an approval occupancies and a significant opportunity to boost on the Olympic Dam project could significantly alter room rates. this outlook. Our room occupancy forecast for 2011 remains on track Canberra with an expected 84.5% at year-end, along with some HMO Q3 Slides.xlsx 11% growth in room rate to $174. This makes Perth the 80.0% $250 77.5% $225 fastest growing market in the country, with an expected 75.0% $200 year-end RevPAR improvement of almost 14% over 2010. 72.5% $175 Provided that Perth hoteliers will again push room rates 70.0% $150 as they did in the initial pre-GFT boom, this growth 67.5% $125 65.0% $100 is expected to be exceeded in 2012 with anticipated 62.5% $75 RevPAR growth of 18.6%, driven almost exclusively 60.0% $50 by 17% room rate growth to $204 by year-end 2012, 57.5% $25 which would exceed Melbourne rates and be close to 55.0% $0 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 average room rates achieved in Sydney by then ($210). Room Occ% Occ% trend (LHS) Room trend (LHS) RoomRoom Rate trend (RHS) (RHS) Rate trend RevPAR trend (RHS) RevPAR trend (RHS) Whilst occupancies are at record levels, development of The newly opened Burbury added some 100 rooms to Canberra new accommodation facilities remains difficult in Perth, the market in Canberra, with a further 130 new rooms though recently announced government incentives slated for completion early in 2012 when the East Hotel may see the initiation of some much needed new hotel in Kingston opens its doors. rooms being constructed. The outlook for Canberra keeps softening, however, Adelaide HMO Q3 Slides.xlsx with our projection for 2011 now revised to an occupancy 80.0% $250 of 71.6% albeit at a slightly higher room rate than in our previous forecast, at $157. 2012 is looking somewhat 77.5% $225 75.0% $200 softer as well, with room occupancy dropping below 70%. 72.5% $175 70.0% $150 Based on past performance however, there is still scope 67.5% $125 for good rate growth, projected at 5.6% in 2012 to $166. Darwin 65.0% $100 62.5% $75 HMO Q3 Slides.xlsx 60.0% $50 85.0% $210 82.5% $195 57.5% $25 80.0% $180 55.0% $0 77.5% $165 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 75.0% $150 Room Occ% Occ% trend (LHS) Room trend (LHS) RoomRoom Rate trend (RHS) (RHS) Rate trend RevPARtrend RHS) (RHS) RevPAR trend 72.5% $135 70.0% $120 It remains surprising that Australia’s smallest and arguably Adelaide 67.5% $105 65.0% $90 least performing city market continues to attract new 62.5% $75 development proposals. Whilst the proposed new airport 60.0% 57.5% $60 $45 hotel would potentially benefit from a significant uplift 55.0% $30 in travel once the Olympic Dam project gains approval, 52.5% $15 50.0% $0 further additions to supply in the Adelaide CBD are likely Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Room Occ% Occ% trend (LHS) Room trend (LHS) RoomRoom Rate trend (RHS) (RHS) Rate trend RevPAR trend (RHS) to result in lower room occupancy levels and hold back RevPAR trend (RHS) growth in average room rates. Darwin6
  • Hotel Market Outlook Q4/2011 Darwin room occupancies continue to climb, Tropical North Queensland HMO Q3 Slides.xlsx though the last quarter was weaker than anticipated. 75.0% $210 Our 2011 forecast sees room occupancies finishing 72.5% $195 70.0% $180 at 72%, up from 70.6% last year. This upward trend 67.5% $165 65.0% $150 should continue through the forecast period, with only 62.5% $135 limited supply additions in sight, being 36 resort rooms 60.0% $120 57.5% $105 in the Sky City project adjacent to the casino in late 55.0% $90 2012, and 96 rooms in the Soho project, aiming for 52.5% $75 50.0% $60 completion in early 2013. 47.5% $45 45.0% $30 This should provide ample opportunity for healthy room 42.5% $15 40.0% $0 rate growth, forecast at 6% in 2011 to $149, and a further Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 8% in 2012 to top $160. Barring further supply additions, Room Occ% Occ% trend (LHS) Room trend (LHS) RoomRoom Rate trend (RHS) (RHS) Rate trend RevPARtrend (RHS) (RHS) RevPAR trend prospects for the following years are even better. TNQ Despite tough economic times, TNQ is seeing modest Gold Coast HMO Q3 Slides.xlsx occupancy improvements, helped by an absence of new77.5% $250 supply and possibly also by troubled operations being75.0% $225 forced to close their doors, resulting in a (small) net reduction of available rooms in the market.72.5% $20070.0% $17567.5% $150 We have strengthened our occupancy outlook for 201165.0% $125 to 57.3% at a slightly softer rate of $117, just $2 below62.5% $100 the 2010 result. For 2012 we expect continued occupancy recovery to reach just over 60%, although room rates are60.0% $7557.5% $50 not expected to see much growth until 2013.55.0% $2552.5% $0 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Room Occ% trend (LHS) Room Occ% trend (LHS) Room Room Ratetrend (RHS) Rate trend (RHS) RevPAR trend (RHS) (RHS) RevPAR trend Deloitte is recognised as one of the leading global Gold Coast advisors to the Tourism, Hospitality and Leisure Despite, or perhaps because of, the opening of three industry, with a practice of more than 2000 new 5-star hotels within a relatively short period of professionals. In Australia, our multidisciplinary time, the outlook for the Gold Coast remains troubled. group of industry experts have a deep knowledge Whilst the 450-unit Hilton has been on the blocks of the market issues and business challenges faced for years, the staged opening of a 250-unit Peppers within the THL industry, both domestically and apartment hotel in the Oracle development, as well internationally. as the inclusion of a 120-apartment Sea Temple in the Soul tower was unforeseen. Your industry, our expertise Our dedicated practice provides a wide range Whilst the quality of these new operations is a welcome of services to financiers, property owners, boost to the Gold Coast that could help lift the overall investment fund managers, private investors, room rate performance, the volume of new units will developers, operators, and associated add pressure to room occupancy performance and may stakeholders, including architects, government force lower quality operations to drop room rates in departments, professional and business lobby order to remain competitive. groups, and tourism intermediaries. Overall, against a backdrop of continued weak demand For a full copy of the Deloitte Tourism, Hospitality and low consumer confidence, the outlook for 2011 & Leisure Hotel Market Outlook – Q4 2011 or weakened further, to an expected occupancy of 65.9% more information about the Deloitte Access representing a 2.3% drop over 2010. The expected Economics Business Outlook – September 2011 year-end room rate slipped another $2 from our last please visit www.deloitte.com.au forecast as well, to $133 which is just $1 above the 2010 result. We remain confident that 2012 will see some improvement, but have scaled back our growth expectations to 66.7% room occupancy at an average rate of $136, representing a modest 3.4% RevPAR growth. Longer term we see some room occupancy recovery towards the 70% mark, along with 4–6% growth in rate. 7
  • Contact usFor further information on how we can support your business needs, please contact one of our Tourism, Hospitality & Leisure specialists:Australia/NSW South Australia Assurance & Advisory Deloitte Access EconomicsIan Breedon Alyson Trottman Stephen Holdstock Lachlan Smirl+61 (0) 2 9322 5888 +61 (0) 8 8407 7259 +61 (0) 2 9322 7299 +61 (0) 2 6175 2000ibreedon@deloitte.com.au atrottman@deloitte.com.au sholdstock@deloitte.com.au lsmirl@deloitte.com.au Northern Territory Victoria Consulting Deloitte PrivateMark Rowberry Andrew Bethune Steve Hussenet Weng Ching+61 (0) 8 8980 6225 +61 (0) 3 9671 7968 +61 (0) 8 8407 7629 +61 (0) 2 9322 3513mrowberry@deloitte.com.au abethune@deloitte.com.au shussenet@deloitte.com.au wengching@deloitte.com.au Queensland Western Australia Corporate Finance TaxMartin Leech Gary Doran Andrew Jones Max Persson+61 (0) 7 3308 7245 +61 (0) 8 9365 7080 +61 (0) 2 9322 5917 +61 (0) 2 9322 7538mleech@deloitte.com.au gdoran@deloitte.com.au andrjones@deloitte.com.au mpersson@deloitte.com.au     Corporate Reorganisation Sustainability John Greig Shauna Coffey +61 (0) 7 3308 7108 +61 (0) 2 9322 3504 jgreig@deloitte.com.au shacoffey@deloitte.com.au    www.deloitte.com.auThis publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities(collectively the “Deloitte Network”) is, by means of this publication, rendering professional advice or services.Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professionaladviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of memberfirms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legalstructure of Deloitte Touche Tohmatsu Limited and its member firms.Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With aglobally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertiseto help clients succeed wherever they operate. Deloitte’s approximately 170,000 professionals are committed to becoming the standard ofexcellence.About Deloitte AustraliaIn Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional servicesfirms, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 5,400people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resourcesprograms, we are dedicated to helping our clients and our people excel. For more information, please visit Deloitte’s web site atwww.deloitte.com.au.Liability limited by a scheme approved under Professional Standards Legislation.Member of Deloitte Touche Tohmatsu Limited© 2011 Deloitte Touche Tohmatsu.AM_Mel_11/11_046033