-Domestic Hotels – How are the cities shaping up in terms of Room Rates
-Domestic Airfares – What should we expect?
-International Airfares – What next?
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Travel & Tourism Sector: 2018 Demand v Supply – Implications for Travel Buyers
1. Travel & Tourism Sector
Presentation to CAPA/ACTE
2018 Demand v Supply – Implications for Travel Buyers
John O’Shea
Senior Research Analyst
+61 3 9608 4146
joshea@ords.com.au
2. Travel & Tourism Sector – John O’Shea 2
! Domestic Hotels – How are the cities shaping up in terms of Room Rates?
! Domestic Airfares – What should be expect?
! International Airfares – What next?
Content
3. Travel & Tourism Sector – John O’Shea 3
! Sydney Hotels rates have grown strongly over recent years with annual
growth rates in the 5-8% range
! Demand has clearly exceeded supply with strong growth in Asian
Inbound adding to the dynamic
Domestic Hotels – Sydney
Sydney Hotels Motels and Serviced Apartments (HMSA) – Average Room Rate
Source: STR
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
165
170
175
180
185
190
195
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
RevPAR - MAT ($) Change (YOY)
4. Travel & Tourism Sector – John O’Shea 4
! Lack of new supply over recent years given superior returns on offer
from other property alternatives (residential and now commercial)
! In the next 4 years room supply is expected to grow at a CAGR of just
2.1% pa but demand is expected to remain strong (ICC adds to this)
! Upward pressure on rooms rates with DHR forecasting inner city room
rates to increase by an average of 6.6% pa across FY17-FY19
Domestic Hotels – Sydney
Sydney Hotels Motels and Serviced Apartments (HMSA) – Supply Pipeline
Source: STR
32000
34000
36000
38000
40000
42000
44000
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21
Existing Rooms Under Construction Final Planning
5. Travel & Tourism Sector – John O’Shea 5
! Melbourne Hotels rates have trended higher over the last 18 months but
the rate of growth has been modest
! Melbourne rates tend to be more event driven (sporting and other) and
hence more volatile or unpredictable
Domestic Hotels – Melbourne
Melbourne Hotels Motels and Serviced Apartments (HMSA) – Average Room Rate
Source: STR
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
150
151
152
153
154
155
156
157
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
RevPAR - MAT ($) Change (YOY)
6. Travel & Tourism Sector – John O’Shea 6
! Also Lack of new supply over recent years given superior returns on
offer from other property alternatives (residential and now commercial)
! In the next 4 years room supply is expected to grow at a CAGR of just
2.1% pa but demand is expected to remain strong
! Upward pressure on rooms rates with DHR forecasting inner city room
rates to increase by an average of 4.3% pa across FY17-FY19
Domestic Hotels – Melbourne
Melbourne Hotels Motels and Serviced Apartments (HMSA) – Supply Pipeline
Source: STR
25000
27000
29000
31000
33000
35000
37000
39000
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21
Existing Rooms Under Construction Final Planning
7. Travel & Tourism Sector – John O’Shea 7
! Material decline in demand post the mining boom has had a material
impact on room rates
! Evidence suggests this still has further to play out
Domestic Hotels – Perth
Perth Hotels Motels and Serviced Apartments (HMSA) – Average Daily Rate
Source: STR
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
125
130
135
140
145
150
155
160
165
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
RevPAR - MAT ($) Change (YOY)
8. Travel & Tourism Sector – John O’Shea 8
! Considerable new hotels were planned/started during the mining boom
! In the next 4 years room supply is expected to grow at a CAGR of
4.8% pa (well above likely demand growth)
! Downward pressure on rooms rates with DHR forecasting inner city
room rates to decline at an average rate of 2.5% pa across FY17-
FY19
Domestic Hotels – Perth
Perth Hotels Motels and Serviced Apartments (HMSA) – Supply Pipeline
Source: STR
6000
7000
8000
9000
10000
11000
12000
13000
14000
Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20
Existing Rooms Under Construction Final Planning
9. Travel & Tourism Sector – John O’Shea 9
! Brisbane room rates under downward pressure in recent times given
end of mining boom
! Recent signs suggest the worst may be over given rate of decline is
slowing?
Domestic Hotels – Brisbane
Brisbane Motels and Serviced Apartments (HMSA) – Average Daily Rate
Source: STR
-16.0%
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
105
110
115
120
125
130
135
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
RevPAR - MAT ($) Change (YOY)
10. Travel & Tourism Sector – John O’Shea 10
! Some new supply over the last few years – this was needed during the
mining boom but less so now
! In the next 4 years room supply is expected to grow at a CAGR of
3.1% pa but most expected in the next two years
! Expect gradual absorption of new supply but DHR still forecasting
Average Room Rate to decline by an average of 1.3% pa over FY17-
FY19
Domestic Hotels – Brisbane
Brisbane Hotels Motels and Serviced Apartments (HMSA) – Supply Pipeline
Source: STR
10000
12000
14000
16000
18000
20000
22000
Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20
Existing Rooms Under Construction Final Planning
11. Travel & Tourism Sector – John O’Shea 11
Domestic Airfares
Source: BITRE
Domestic Airline Passengers MAT m
Domestic Airline Passengers MAT growth
Domestic Airlines Load Factors & ASK’s (m) - MAT
! Domestic Airline passenger growth remains modest reflecting a
subdued Corporate market and an uncertain Leisure segment
! The current Domestic Airline passenger growth rate of 1.6% is
well below the 10 year average of 3.1% and follows a slow
recovery from the post mining boom adjustment given the
material cuts to airline capacity within these regions
! Business and Consumer Confidence the key to the Outlook for
Corporate and Leisure passenger growth respectively – recent
indicators here have been mixed
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
40.00
45.00
50.00
55.00
60.00
65.00
75.5%
76.0%
76.5%
77.0%
77.5%
78.0%
78.5%
79.0%
88,200
88,400
88,600
88,800
89,000
89,200
89,400
89,600
Millions
ASKs (LHS) Load Factor % (RHS)
12. Travel & Tourism Sector – John O’Shea 12
! Domestic Airfares have remained subdued given the relatively
soft demand environment from both the Corporate and Leisure
segments
! Domestic airlines have reduced capacity to reflect demand
conditions but this in isolation is unlikely to be sufficient to
materially change the outlook fro airfares
! Expect Domestic Airfares to remain flat to modestly higher for
the foreseeable future
Domestic Airfares
Source: BITRE
Domestic Business Class Airfares Index Restricted Economy Airfare Index
Domestic Discount Airfare Index
50
60
70
80
90
100
110
120
Business Class Business Class 13 Month Moving Av
60
70
80
90
100
110
Restricted Economy Restricted Economy 13 Month Moving Av
40
50
60
70
80
90
100
110
120
Best Discount Best Discount 13 Month Moving Av
13. Travel & Tourism Sector – John O’Shea 13
! Material decline in International Airfares over the last 5 reflects strong growth in LCC’s, the
increasing completion provided by Middle East Carriers and a clear government focus on
encouraging Inbound Tourism via air capacity
! In recent months we have seen some evidence that we may be past the bottom or at the
very least the rate of decline appears to be slowing – Has Trump caused a re-think from
some Middle Eastern Carriers or has the industry realized that things have gone far
enough?
International Airfares
International Passenger Yields
Source: IATA
14. Travel & Tourism Sector – John O’Shea 14
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