Tourism growth drives development boom in Australia

New hotel room supply in Sydney, Australia has driven declines in both occupancy, despite the increase in demand and hotel performance, according to a report from Horwath HTL Australia. 
From 2000 to 2016, Sydney only got about 3,000 new guestrooms. Photo credit: kitkatty007 / Pixabay

Australia's hotel sector is in the middle of a rapid growth phase—reportedly the biggest since the lead-up to the Sydney Olympics in 2000.

According to Tourism Accommodation Australia, the uptick began three years ago, and more than 40 new hotels have been built across the country since then. A further 272 new hotels are in the pipeline for completion by the middle of next decade.

Tourism Accommodation Australia CEO Carol Giuseppi told local site ABC News the rapid expansion came down to investor confidence, thanks to growing demand, low interest rates and solid exchange rates for global investors.

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Moreover, Giuseppi said the federal government had negotiated more than 100 bilateral air services agreements in recent years in a bid to bring in more inbound visitors, boosting the need for more hotel roms.

From 2000 to 2016, Melbourne and Sydney only got about 3,000 new guestrooms each as demand fell off following the summer Olympics in Sydney. But with the expected increase in inbound visitors, TAA is predicting another 11,600 rooms are due to be added to the Sydney market and more than 15,000 more in Melbourne by 2025.

TAA's "Innovation Revolution Transforming Australia's Hotel Industry" report shows the construction wave will see more than 45,000 new rooms added in Australia by 2025. But Gus Moors, head of hotels at Colliers International Australia, cautioned that some of those deals may fall through as the market fluctuates over the coming six years.

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