Tourism numbers continue to bounce back each period, after the lows of 2021, supporting a renewed interest in the hotel property sector. Data from ABS for February 2024 shows monthly visitor arrivals reached 857,950, up 42.8 per cent on the same period last year, totalling 7,636,090 arrivals in the last 12 months (up 67.6 per cent). Aviation data echo the continued growth in international tourist arrivals with February 2024 recording the highest volume of flight movements, outstripping pre pandemic levels. This latest period has shown an average of 3,898 inbound flights per week, up from 1,500 in 2023 and 1,862 in 2019.
The huge increase in international flight movements into Australia has come notably from New Zealand and neighbouring Asian nations. New Zealand had 1,146 average flights per week followed by Indonesia (513), Singapore (339) and Japan (244). These markets also have strong tourism regions which attract Australians needing return journeys. The key difference in this makeup compared to pre-covid periods is the strong dominance of New Zealand, which typically has resulted in half as many flights, and the increase in activity from Japan, indicative of the attractive currency rate and discounted air travel from Australia growing this destination as a favourite amongst Australians.
Strong gains in international visitor numbers paired with continued domestic travel activity has had a positive impact on the hotel trading results with average daily room rates and occupancy improving across most Australian cities. Sydney continues to be the most expensive city to holiday with the average room rate $289.80/night in March 2024, up 5 per cent over the same period last year, couple this with strong occupancy of 81.9 per cent, this has grown RevPAR (Revenue per available room) to $237.31/night a 6.3 per cent annual increase. Hobart features the highest occupancy rate this period at 85.2 per cent, however, it is one of the two cities which have seen room rates decline, down 3.7 per cent to $226.84/night.
The Gold Coast continues to be a mecca for not only international visitors but domestic holidayers, resulting in room rates increasing by 6.7 per cent compared to last March to $254.54/night. Occupancy this month sits at 67 per cent, a strong improvement on March 2023 results but below rates achieved during the summer holiday period in December and January which exceeded 70 per cent. An increase in quality hotel stock in Perth and Melbourne has done much to grow average daily room rates, to $238.23 and $250.83 respectively.
Despite higher occupancy and growing room rates, the increased cost of labour and inflationary pressures on goods have impacted trading results for most establishments. However, the attractive growth in revenues and high occupancy has renewed confidence in investment into hotel assets by the private sector. Over the last 18 months, investment activity has remained subdued compared to pre-pandemic levels, with offshore buyers representing net sellers, however, they are tipped to bounce back later this year, looking to capitalise on these increased returns and stable investment yields. Recent activity has been centred around the east coast, with Sydney and Queensland markets the most active, while average reported yield ranges remain vast with transactions ranging from 4.3 per cent to 8.5 per cent over the last 18 months.
