Over the five years through 2010-11, industry revenue is estimated to increase at an average annual rate of 1.2%. For 2010-11, the hotels and resorts industry is expected to recover strongly after two years of declines. This will result from a return to robust growth in both domestic and international tourism due to stronger economic growth and traveller numbers.
Guest nights and room rates are on the rise, particularly from business travellers and assisted by the pickup in holiday travellers. Hotel property values have now stabilised, with hotel sales commanding stronger interest from both international and domestic investors. This is being confirmed by successful sales of quality five-star hotels and resorts located in CBDs.
Industry revenue is expected to total $6.40 billion in 2010-11, with solid real growth of 6.9% from the previous year. Continuing subdued growth in new hotel investment and consolidation among operators is expected to see enterprise and establishment numbers rise by 0.8% and 1.3%, respectively, to 1,018 and 1,292. Industry employment is also expected to rebound by 3.7% to over 73,700 workers, with industry wages up 4.4% to $1.52 billion.
Higher domestic interest rates in late 2011 are expected to adversely affect domestic holiday travel intentions and bookings. Rising accommodation demand in the resource-rich states of Queensland and Western Australia is partly offsetting this, as commodity prices and mining investment boom once more, although major flooding in Brisbane and other parts of Queensland in 2011 is expected to limit some of this growth.
With softening tourist accommodation demand to mid-2010, the industry continued to suffer from low average revenue per available room and weak profit in 2009-10. Signs of a recovery in global international movements were evident from late 2009, with the Asia-Pacific region recovering faster than other regions. In 2009-10, falling global hotel room prices, coupled with generally discounted airfares and favourable Australian currency movements, resulted in a boom in Australians travelling overseas. Over 6.8 million Australians travelled overseas during 2009-10 (up 17.7%), compared with virtually no change in overseas visitors to Australia, at 5.7 million. Domestic tourism performance also continued to disappoint, particularly business, convention and seminar travel, as travel for all purposes declined. Domestic visitor nights fell 2.8% in 2009-10, their lowest point in over 13 years. In addition, overall tourist expenditure within Australia from any source was up only 1.1% in real terms.
Over the five years through 2015-16, industry revenue is expected to increase at an average annual rate of 4.45% to total $7.95 billion.
Over the five years through 2015-16, real industry revenue is forecast to increase at an average annual rate of 4.5% as the cyclical upturn gains momentum and growth in the domestic and international economy strengthens. However, revenue growth and new investment in the Hotels and Resorts industry will be tempered somewhat by increasing competition from other accommodation industries. Competition will particularly be evident from the Serviced Apartments industry, which is better aligned with changing consumer preferences for accommodation, including a more at-home feel. Of particular importance to this industry will be some further growth in domestic leisure travel from 2011-12 linked to continued stronger economic growth. Discounted domestic airfares and higher growth in corporate travel will result, as will an upswing in government and event-based travel. Since 2010, some increasing hotel investment has occurred in Melbourne and Adelaide, which may eventually spread to other cities, but not until the latter half of the period.
Some growth in international visitors to Australia is expected from 2011-12. More tourists will come from high-growth markets such as China, India and some other parts of Asia, with the added benefit that they have a higher propensity to use hotel accommodation when travelling in foreign lands.
Further improvements in profit margins are anticipated as industry revenue rises, associated with a significant upward movement in average room rates. This will be assisted by continuing shallow growth in new hotel supply until the later part of the five-year period. Industry employment is forecast to increase at an average annual rate of 0.8% to 76,550 people by 2015-16. Overall, industry consolidation and restructuring will remain important, due to changes in hotel ownership. Additionally, there will be continued use of casual and part-time staff, and staff working split shifts to cover peak customer-service periods and special events.
In 2011-12, it is anticipated that the industry will be positively influenced by the strengthening cyclical upturn in economic activity. This will result in generally higher domestic employment growth and more robust movements in household disposable income, business revenue and profit. Relatively strong growth is expected across both domestic and international arrivals as global economic conditions generally improve. Room rates are expected to increase significantly, resulting in solid revenue and profit growth.
A further significant upswing in domestic economic activity is also forecast from 2012-13, which is expected to encourage good growth in hotel demand. This will result from growth in holiday, business and government travel and will lead to a return to higher growth in both industry revenue and profit. A strong recovery in average room rates and more robust growth in profit are also forecast.
In line with global hotel trends, major operators are exiting building-ownership models to concentrate on management-only services. Hotels are increasingly being owned by superannuation funds, fund managers and property trusts. This trend is expected to continue over the next five years. The global hotel management and franchising trend will increase both the size and globalisation level of operators in the local industry, giving them both national and international coverage. Portfolios include properties covering nearly all star ratings, each operating under a distinct and consistent brand.
Major hotel refurbishment projects in capital cities will continue to move towards providing integrated in-room technology operated by a single touch screen. Integrated technologies include plasma TVs, DVD/Blu-ray players, iPod and iPhone docks, digital surround sound, and wireless internet access. Hotel and resort refurbishments will establish new trends for these properties, and will raise guest expectations for increased service and improved quality room fittings
Robert Bryant is the general manager of business information firm IBISWorld.
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
