Australia's hotel industry has unexpected ally against Airbnb

(Sydney, Australia's business district.)

While investors and developers are looking to build up Australia’s hotel supply to cater to growing demand, other entrepreneurs are taking advantage of the sharing economy and boosting the country’s home-rental supply. 

Deloitte’s "Developments in the Collaborative Economy in New South Wales" report found that Sydney jumped from 10th in the global Airbnb rankings in 2015 to fifth in 2016, with 4,500 listings in the city, making the city one of the top five markets in the world for Airbnb.

The number of properties listed in New South Wales more than doubled in 12 months, from 16,200 in 2015, to 38,000 properties in 2016. Sydney listings have doubled annually over the past five years to more than 15,600 in January 2016. New South Wales now represents more than half of all of Australia’s 60,000 Airbnb listings.

Last year, Airbnb said there were 262,000 inbound guests to Sydney for year-on-year growth of 106 percent.

Australia’s Pipeline

It’s hardly news to say that Australia needs more hotel rooms. According to Tourism Accommodation Australia, as of last month, the country has 228 hotels with 34,702 rooms currently under construction, approved for development or in advanced planning stages across the country’s capital cities.

“Cities such as Perth, Brisbane and Adelaide have been transformed by a substantial number of new hotel openings in the past few years, and Sydney is set to follow suit with $2.3 billion worth of hotel projects already approved and a further $1.9 billion of projects proposed and in advanced stages of planning,” TAA CEO Carol Giuseppi said at the time. “Investor confidence is being supported by federal and state governments’ commitment to major tourism and urban infrastructure projects including new convention centers, airport facilities and tourism precincts.”

Upcoming hotels include Marriott International’s Luxury Collection Hobart, due for completion in 2018, and IHG’s Holiday Inn Sydney Central, scheduled to open in 2020. 

Next Steps

But a lot of these developments are a long way off, and with tourism numbers continuing to rise, more visitors may opt to stay in an apartment than a hotel. 

Australia’s hotel industry may have an unexpected ally in the fight against Airbnb, however: Local Airbnb competitor Stayz—which is owned by online travel agency Expedia—has partnered with Tourism Accommodation Australia to call for caps on the number of nights apartments in inner-city areas can be rented, in ­addition to tougher measures regulating the platform in metropolitan areas including data sharing with authorities and stricter insurance requirements.

Why would a home-sharing service take steps to limit the number of nights visitors can stay in a shared home? Stayz specializes in rentals located outside of metropolitan areas, and would benefit if visitors seeking long-term stays had to look beyond city centers. 

But beyond that, Giuseppi said, TAA is concerned about city-center apartments that are rented out full time, limiting availability for people seeking homes in the city. According to InsideAirbnb, Sydney’s top 10 most successful hosts control more than 800 properties in the city. “These are commercial operators that limit capital city residents from having access to affordable housing,” Giuseppi said.

Earlier this week, the two groups submitted a joint letter to the NSW government outlining concerns about the impact unrestricted short-term rentals have on the traditional rental market and housing affordability in capital cities. The NSW government is expected to hand down new guidelines for short-term rentals across the state next week.

While home-sharing regulation would be a step in the right direction to help city-center hotels, developers and investors should look for any way possible to speed up hotel projects in Australia's urban hubs. The demand is there, but if the hotels don't keep up, visitors will look elsewhere, and hotels will lose the chance to build loyalty and brand awareness.