Australian hotel recovery to match US, UK once restrictions end

As seen on-line in the Australian Financial Review

Larry Schlesinger  |   September 20, 2021


 

Australia’s beleaguered hotel sector will rebound sharply to match 60 per cent occupancy levels being achieved in country’s “living with the virus” such as the US and Britain once restrictions start to ease, the country’s leading hotel owners and operators have confidently predicted. 

These bullish outlooks follow the national hotel occupancy rate falling to 30.8 per cent in August, the lowest level since May 2020, according to new figures from analysts STR.

Worst performing were Sydney and Melbourne with 22 per cent average occupancy rates, while those cities not in lockdown – Perth (49 per cent), Brisbane (40 per cent) and Adelaide (38 per cent) – fared better, but still suffered from a lack of interstate travel.

By contrast, the US recorded occupancy rates between 61 and 68 per cent over August, according to STR, London managed an average rate of 57 per cent over the same period – its highest level since March 2020 – and Dubai recorded occupancy of 58 per cent.

Reinforcing just how strong the recovery can be at high vaccination rates and few restrictions, in July, US hotels achieved higher gross profits than before the pandemic on a “surge of leisure demand” coupled with “leaner operations”.

Simon McGrath, chief executive of Accor Pacific, the country’s biggest hotel operator, said the recovery in other parts of the world was “definitely achievable” in Australia and the region. 

He pointed to the example of previous, post-lockdown rebounds, as evidence of the pent-up demand among Australians to travel. 

“Over January to June [when there were no lockdowns], we were only 15 per cent down [in revPAR] on 2019,” Mr McGrath said. 

“We expect things to start opening up in October, led by NSW. November, December and January should be good months if the state borders open up as they should. 

“Vaccination should give us the confidence to open up. We just need the courage to do it.”

Australia is on track to achieve a 70 per cent fully vaccinated adult population by the end of October and over 80 per cent by December, when domestic and international travel restrictions are expected to be lifted for those double-dosed.

Jan Smits, co-CEO of Pro-Invest Group, which last week settled the $132 million purchase of Sydney’s five-star Primus Hotel (to be rebranded as a Kimpton), said all of its Holiday Inn Express properties were open to accommodate essential workers, despite occupancy rates of just 2 to 10 per cent in Sydney and Melbourne.

“We expect business will be strong when restrictions ease – both inbound and outbound. Inbound as Australia is seen as a safe and desirable destination. We know there are international travellers who are keen to come here,” Mr Smits said.

“We also see a huge pent-up demand from the domestic market,”

After paying $620 million for 11 Travelodge hotels in July, fund manager Salter Brothers is also banking on a big turnaround in operating performance across its $2 billion portfolio once lockdowns end in NSW and Victoria by early November.

“We’re expecting occupancy of 65 per cent or greater in December in Sydney after reopening,” said director of hotels Steven Skarott.

“After 10 weeks of lockdown in NSW, the built-up demand is there and similarly inVictorian and the ACT.

Mr Skarott also anticipated a strong festive season would drive occupancy rates at the group’s Brisbane and Gold Coast hotels to between 60 and 65 per cent occupancy, or higher if all states allow “unfettered travel”.

“We’re gearing up for this … we’ve just completed refurbishments at our Crowne Plazas at Coogee Beach and Melbourne and the Hyatt Regency in Brisbane,” he said.

 


View article online at AFR

Salter Brothers Asset Management Pty Limited: ABN 33 119 833 760, AFSL 308971 is the trustee of all Salter Brothers Funds.