Why Australia is seeing a hotel construction boom

(Four Points Sydney)

Australia's hotel industry is likely to 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 the country's economy.

More than 8,000 hotel rooms are currently under construction, but the potential pipeline could reach 30,000 rooms--and hotel consultant Dransfield believes that a record number of travelers could fill all of those rooms.

Researcher BIS Shrapnel predicted that the value of accommodation construction would surpass $2.2 billion in 2016, and that it would stay high in 2017 and 2018. BIS Shrapnel associate director Kim Hawtrey said that hotel construction was at its strongest numbers since the late 1980s.

"We're seeing a five-year run for accommodation construction, as the market plays catch-up following the post-[global financial crisis] slump," Hawtrey said.

Hawtrey credited the boom to the lower Australian dollar (which has promoted domestic travel) and "steady growth" in Asian tourism. "All of the major state capitals will see sizable projects commence over the next 12 months, including Adelaide and Perth," he said.

Notable projects include new Ritz Carlton hotels in Melbourne and Perth being developed by Hong Kong's Far East Consortium, Lendlease's new Sofitel hotel at Darling Harbour (acquired by investor Jerry Schwartz and to be operated by Accor), and longer-term projects such as James Packer's proposed Crown Resorts casino and hotel at Barangaroo.

Locally, Mantra Group, the country's fastest-growing hotel operator, has a dozen hotels in its pipeline including new hotels at Sydney Airport, in Perth and Canberra. Fellow ASX-listed hotel operator Event Hospitality and Entertainment is also adding new hotels under its QT and Atura brands.