Why Australia's hospitality industry is booming

Four Points Sydney

In July—the middle of Australia's winter—a report suggested that the country's hotel scene would likely see a construction boom lasting for at least another two years as tourism spending, predicted to reach $167 billion by 2025, plays an ever-larger role in Australia's economy.

The good times are still rolling as spring comes to Australia: The country’s hotel market, particularly in Sydney and Melbourne, is experiencing an “unprecedented alignment of positive fundamental indicators,” according to Gus Moors, head of hotels for Colliers International. 

The first nine months of 2016 saw about $1.7 billion of hotel transactions take place in Australia, including the $700-million Zhengtang Group investment into Sydney’s Ribbon development. High occupancy rates, a benign supply outlook and increased air capacity from key markets like China and India mean that hotels are likely to keep proving profitable. 

International passenger traffic to and from Australia reached record levels last year at 34.9 million, up from 33.1 million in 2014. Annual growth has been consistent at more than 5 percent in passenger movements on international airlines to and from Australia over the past five years.

The recently released Central Sydney Planning Strategy identifies 10 “key moves” to ensure the city can adapt to the projected growth over the next 20 years, with mixed-use developments as a key focus. These projects let developers leverage greater floor space ratio and height.

“The difference with this particular development cycle versus historic ones is that it is underpinned by strong fundamentals, backed by tourism-generating infrastructure like the International Convention Centre, and capped off by a strong appetite for hotel investment opportunities driven by onshore and offshore investors,” Moors wrote. “When this is combined with mixed-use offerings–retail, residential and commercial–it helps to ensure the viability and long-term sustainability of hotel development projects.”