It’s been a busy holiday period in Australia with both domestic and international travel reaching new highs. There’s been strong hotel occupancy levels and new benchmarks in average daily room rates recorded across Australia. After a number of years of poor results, this has put the spotlight again on the accommodation sector as a viable investment opportunity from 4 & 5 star full-service hotels in major tourism centres through to the regional hotel/motel segment.
While Australians are excited to get back to international travel, the high cost of airfares, inflationary pressure on food, transport and accommodation coupled with the AUD has seen domestic travel options grow in popularity. The drive segment has shown good results with occupancy improvements across regional areas of Australia setting new highs in daily room rates. International visitors have also been quick to return to Australia taking advantage of the dollar and summer months with inbound international aviation statistics highlighting an average of 1,520 flights per week coming into Australia across 52 destinations in December. While this is still below pre COVID-19 results (December 2019) of 2,167 per week there has been a vast improvement since early 2022 where just 400 flights per week were entering Australia.
While our inbound international visitor numbers have been increasing over the last 12 months, recent forecasts by Tourism Research Australia (TRA) expect that inbound visitor arrivals will not reach 2019 levels until 2025. Similarly our outbound travel internationally is also expected to slowly recover to pre COVID-19 level in 2024/25. As a result domestic nights have grown to over 400 million in 2022 which is already ahead of 2018 results, the expectation being that over the next five years this will average 444 million nights, well ahead of the long-term historical average of 310 million nights. Domestic tourism expenditure has already eclipsed results seen in 2019 with continued annual growth of 4.7% expected over the next five years making hotel investment attractive.
Capitalising on this growth potential, interest in the hotel sector in 2023 will continue after a strong 2022 which achieved $3.2 billion in sales. Offshore buyers accounted for 58.4 per cent of these sales and are likely to continue to seek out these quality, ongoing returns. Savvy local groups and private investors notably in the smaller, regional markets are expected to remain active however financing availability may be a stumbling block for some buyers.
