Across Australia, the number of hotel rooms under construction has declined a further 18.6% since September 2005. However total rooms likely or proposed to be developed have increased by a massive 43.1% - suggesting developers and investors alike have taken note of improved hotel trading performance in most key markets.
According to Jones Lang LaSalle Hotels' six monthly National Hotel Development Register, which tracks major tourist accommodation development in the ten major markets in Australia, there are presently 2,355 hotel and serviced apartment rooms under construction and a further 3,639 rooms considered likely to commence construction over the short to medium term.
'With hotels currently enjoying the highest RevPAR (revenue per available room) levels on record, many projects are now moving from concept stage and into development,' said Mr David Gibson, CEO Asia Pacific, Jones Lang LaSalle Hotels. The most recent hotel trading performance data shows hotels in Australia yielded on average $77 per room, an increase of 5.6% on the previous year.
'While room rates have recently increased across the board, further growth is still required to make most hotel projects feasible,' said Mr Gibson. Across Australia, land and construction costs still remain too high relative to the likely values on completion.
Mr Gibson added, 'Support from Government, normally in the form of minimal land costs and favourable ground lease terms would assist some developments particularly in markets where supply shortages will soon start to turn business away to other destinations.'
Of total rooms proposed, hotel projects, as opposed to serviced apartments, now account for 63.2% (2,301 rooms) compared to only 42.8% (1,088 rooms) six months ago - a spectacular increase of approximately 111%. 'The continued slowdown in the residential market has stalled some serviced apartment developments, particularly in Canberra where a number of residential conversions were planned,' said Mr Gibson.
Approximately 67% of the projects likely to proceed will be built in Melbourne, Cairns and Sydney. 'Two very large hotel projects are planned in Melbourne, one of which is supported by the State Government and another significant investment in tourism infrastructure with the planned extension of the Melbourne Convention Centre,' said Mr Gibson. These two projects and one other will boost total hotel room supply by 830 rooms - one other serviced apartment project is likely to add a further 182 rooms.
With a number of hotels opening in Melbourne prior to the Commonwealth games and the residential slowdown affecting serviced apartment sales in other markets, the number of hotel rooms under construction in Australia has decreased by 538 rooms since September 2005. 'Our register shows that development activity is most dominant in Sydney, Gold Coast and Brisbane, however given the size of these cities the impact of these rooms on the market when they open should be minimal,' said Mr Gibson.
'With 511 rooms currently under construction and relatively weak demand growth relative to other capital cities, the Sydney hotel market will have to look at new methods for attracting guests,' said Mr Gibson. Despite lower occupancy levels at present, Sydney hoteliers have managed to increase average room rates to $169. 'The positive outlook for trading conditions in Sydney is contributing to ongoing speculation regarding development activity,' said Mr Gibson.
Development activity on the Gold Coast continues with 448 new serviced apartment rooms entering the market before year end 2006. 'In addition to Q1 recently opening, the Sunland Group has 300 more rooms under construction with their Circle on Cavill and Avalon projects,' said Mr Gibson. Recent hotel trading performance on the Gold Coast has not been as strong as other major markets around Australia. During the December quarter 2005, occupancy levels remained static however average room rates increased by 5.6% to reach $124.
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