Australia’s hotel boom continues despite the absence of Chinese tourists, but domestic travelers are paying the price

Since the reopening of borders, Australia’s international visitor numbers have been more of a trickle than a flood, with many key markets, including China, still missing amid persistent COVID-19 checks, inflation and geopolitical concerns. .

June data from the Australian Bureau of Statistics reveals outbound travelers are growing almost three times as fast as inbound as Australians continue to flock abroad.

And yet, a plethora of new hotels continue to spring up along the East Coast, many conceived with the promise of hosting 1.3 million Chinese tourists, a number that has shrunk to virtually zero.

Now, a strong domestic market is ensuring that hotels not only survive this pandemic slump, but also thrive.

Australia’s hotel scene has exploded in recent years; many projects now under construction were given the green light before the pandemic. Some major developments have experienced setbacks and construction delays, including W Sydney and Ritz-Carlton Melbourne.

Melbourne leads the growth, with more than 2,500 new rooms under construction, followed by Sydney (1,639 rooms) and Brisbane (1,386 rooms), according to data from Jones Lang LaSalle Incorporated (JLL).

The interest in development is not diminishing either. Peter Harper, JLL’s head of investment sales in Australasia, says that despite market uncertainty, transaction activity has remained strong in 2022, led by the sale of the Hilton Sydney, the largest single asset transaction in Australia for $530 million.

“The biggest issues hotel investors are facing right now is the rising cost of debt and significant labor shortages. The decline in Chinese tourism is not really in the conversation,” says Harper.

Of course, the lack of inbound visitors is not doing Australians’ holiday budgets any favors, as data reveals that domestic travelers are paying for these financial hurdles.

Pent-up demand and government accommodation voucher schemes have helped push up hotel room rates, with hoteliers pocketing more per room than they did before the pandemic, helping offset falling demand. occupancy caused by low number of visitors.

STR data for July shows that although Sydney hotel performance declined from the previous month, average daily room rates were $239.96, down from $197.41 in 2019. In June , Melbourne hotels posted an average daily rate of $210.54, a significant jump from $168 in 2019. .

Tourism Accommodation Australia CEO Michael Johnson says the loss of the Chinese market is “a blow to our industry”, and room rates are unlikely to drop any time soon, as long as Australians are still willing. to spend more.

“There are still some voucher schemes across the country that the government is subsidizing, like the Stay NSW voucher scheme. Vouchers have pushed up room rates,” Johnson said.

“Once we start to see the market level off, the coupon programs cease and more internationals come in, especially if they’re charging wholesale rates, we may see those rates recede a little bit.”

The Stay NSW voucher scheme, which allows eligible residents to claim $50 towards an accommodation booking, expires on 9 October 2022. The Victorian travel voucher scheme, which allows residents to claim up to $200 in expenses related to state-based travel, expired in May. 2022.

The tourism sector is now focused on growing new markets, with India – Australia’s fastest growing market for visitor spending in 2019 – at the top of the hit list. Qantas is leading efforts in the aviation sector with plans to launch a Sydney-Bengaluru service on September 14, 2022, along with a new codeshare partnership with IndiGo. On the other hand, Australia and India have started negotiations for a free trade agreement, to encourage tourism between the two nations.

But can hotel operators expect a return of Chinese tourism? China’s government has banned all “non-essential travel” under a strict zero-COVID strategy aimed at stamping out the virus.

James Laurenceson, director of the Institute of Australia-China Relations at the University of Technology Sydney, noted: “Chinese opinion polls conducted last year, even amid worsening geopolitical tensions, showed that, in general, the desire to travel to Australia for tourism purposes remained strong.

However, given Beijing’s extreme approach to COVID, Chinese tourism is unlikely to return in any significant way this year. Laurenceson says it’s about waiting for the Chinese government to liberalize outbound tourism flows, “most likely from the second quarter of next year.”

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