dae tourism hotel outlook feb 2015

8/18/2019 DAE Tourism Hotel Outlook Feb 2015

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Tourism and Hotel Outlook 2015 | Australia 1

Tourism and HotelMarket Outlook 2015February 2015

Deloitte Access Economics


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Executive summary

The outlook for Australian tourism has not been moreencouraging since pre-GFC. And with the hotel supply pipelinebroadly stable, this positive demand outlook will only pushhotel performance higher nationally – and across most majormarkets – over the next three years.

• While Australians continued their love of

overseas travel – with trips growing 5.2%

for the year – outbound departures continue

to track toward our medium term forecast

range of 3%-3.5% and are now well off their

double digit highs of five years earlier

• The lag between exchange rate movements

and travel patterns mean the impact of the AUD

on outbound travel is still some way from fully

materialising. Most recently, it has been through

per-trip expenditure reductions that travellers

have responded to the AUD’s decline.

International tourism

• The end of 2014 saw a continuation of strong

growth in international tourism, aided by a faster

than expected depreciation of the Australian

dollar. Overall, international visitor arrivals grew

by 8.2% over the year to September – the fastest

rate in over a decade1

• Leisure travel led the way. It too posted its fastest

pace of growth in ten years, with visitor numbers

increasing 10.4 %.

• Visitor arrival growth from China retainedthe double digit pace that has been a feature

of the last decade, with arrivals growing

10.5%. Spending activity of Australia’s most

valuable market grew 15.8% over the year

to September

• However, growth in arrivals from China was

outshone by some of emerging Asia’s other

stars, with Malaysia, Singapore and Hong Kong

all posting growth in excess of 14%

Overall, the global economic outlook has

moderated over the last 12 months. Critically,

however, it remains strong – and in parts

strengthening – as far as our main tourism source

markets are concerned. China is slowing, but

growth remains healthy. The deprecation of the

AUD, while expected, has come sooner and more

sharply than anticipated. This, combined with the

steep fall in oil prices, is of course good news for

the Australian visitor economy.

Domestic tourism

• Domestic overnight travel had a standout year

in 2014, as visitor trips grew by 5.0% and visitor

nights by 6.7% over the year to September.

This was a particularly large boost for visitor

nights, rebounding from trend growth of 1.2%

in March to grow at their fastest pace in two

decades. Average trip duration hit 3.8 nights

per trip, edging back toward their historical

average of 4.0 nights

– The main drivers of this growth were corporate

travel and visits to friends and relatives. Business

trips grew 8.0% for the year – representing1.1 million additional trips – and, encouraging,

positive growth was observed across all of the

resource-focused states

– VFR travel grew even faster, at 9.0%

year-on-year, adding 2.3 million trips

• Domestic leisure travel reversed the gains made

over the preceding 12 months, with domestic

leisure trips falling 1.0%

• Across Australia, NT and Victoria were the

biggest beneficiaries of domestic travel growth,

with arrivals doubling the national pace. WA also

outperformed the average. The results for theother States was mixed, except ACT, which saw

both visitor nights and trips slide back a touch

1. Note that the ABS hasadvised of a delay in the

processing of the October

and November Overseas

Arrivals and Departures data.


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• While China may no longer be assuming the

mantle of fastest rate of growth, in volume

terms it is ahead by a good margin. In fact,

over the last four years, growth in visitor

numbers from China has averaged nearly

100,000 annually. To put this into perspective,

it is nearly 50% higher than at the peak of the

Japanese tourism boom (1992 to 1996).

• On the traditional market front, improved

economic conditions in the UK and US

continued to spur arrivals from theseimportant legacy markets. In fact, visitation

from the US is growing at its fastest pace

since the Sydney Olympics

– The impact of mainland Europe’s economic

sluggishness was limited by the fact that

no European nations are among Australia’s

top ten tourism markets

• The growth in international visitors was

shared across the country, with all States

except Queensland experiencing arrivals

growth above 6%

• Destination Australia again outperformed otherdeveloped countries in the global tourism

stakes, with arrivals growth well clear of US,

UK or France. However, steep competition

locally saw the likes of Thailand, Hong Kong

and Singapore all outpace Australia (and

therefore increase their market share).

Hotel performance

• 2014 was another year of robust growth

for the Australian hotel sector, with both

occupancies and Average Daily Rates (ADR)

growing 2.2% and RevPAR increasing 4.4%.The gains made in the past five years are

double that lost during the GFC, with both

occupancies and room rates at levels never

previously recorded

• However, it was also a year where pockets

of market performance – room rate growth

in particular – belied what the underlying

fundamentals would suggest. Occupancies

in Sydney and Melbourne regularly passed

the 90% mark and, overall, have never been

higher. Yet room rates didn’t grow materially

above trend

• That aside, the shifting drivers of Australia’s

economic fortunes continue to bear on hotel

market performance. Mining states held firm

– indeed, NT pushed ahead strongly – and the

economic transition back to the south east

continued to play out

– Occupancies in Sydney and Melbourne

continued to track higher, posting averages

of 87% and 86%, respectively. Room rate

growth was solid, but below what such

elevated occupancies would suggest. – Despite domestic leisure growth being

subdued, Gold Coast outperformed its historical

benchmarks by a considerable margin

– Hobart and Adelaide both grew strongly,

adding 4% to occupancies on the back of

the younger, short stay segment in the case

of the former; and greater Asian connectivity

in the case of the latter

– Brisbane and Perth, the two markets

experiencing the back end of a boom in

business travel related to resources investment,

were resilient in maintaining occupancies.Yet this came at the expense of rates growth

for Perth. Darwin witness softer occupancies

alongside the nations’ fastest room rate growth.

OutlookMacroeconomic developments

• The global economic outlook has softened

marginally, but remains robust among Australia’s

major tourism source markets. The continued

positive news from the UK and US adds to

a broadly firm outlook for our major growth

driver, emerging Asia.

• The two major developments in the

macroeconomy are the rapid decline in the

USD:AUD exchange rate, and the drop in crude

oil prices in recent months. The former has been

foreshadowed by Deloitte Access Economics

for some time and is very much built into our

forecasts; the latter is more unexpected (at least

in timing and pace).


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• Domestically, falls in resource prices, interests

and the AUD (all interrelated, of course) are

accelerating the economic transition that

Australia is experiencing, against the backdrop

of a marginally softer overall economic outlook.

The baton is progressively being passed from

the states and sectors most recently in the fast

lane, to those which have made only a modest

contribution to economic growth of late.

Domestic and international tourism• The continuation of direct air access via carriers

such as Scoot and Air Asia X, along with major

reductions in jet fuel costs, has provided some

upside on the Deloitte Access Economics’ July

forecasts for international arrivals.

– Arrivals are projected to grow by 5.7% and

international visitor nights by 5.6% over the

next three years

– Increased visitation from Indonesia and

Malaysia, along with the accelerating

economic recovery in the US has their forecast

growth rates up from July – A reduction in jet fuel prices helps Australian

tourism in particular, where fuel costs make

up a large part of airfares, which in turn make

up a large part of overall travel cost. This

reduction will be felt by source markets across

the board

• Outbound travel has maintained its growth

through travellers’ selection of more affordable

destinations, and a winding back nightly

expenditure. However, the full impact of the

lower exchange rate will play out over the next

12 months – Deloitte Access Economics continues to

forecast outbound travel easing to 3%-

3.5% p.a. over the next three years as these

dynamics work through

• The rate of the decline in exchange rates

means domestic travel will represent better

value sooner, hence the forecast growth in

domestic visitor trips has risen to 2.4% p.a.,

up from 2.0% p.a. in the July outlook. This is

notwithstanding the impact of crude oil prices

on outbound travel costs.

Hotel performance

• National hotel demand – measured as room

nights sold – is forecast to add 2.5% p.a. on

average over the three years to December 2017

• On the supply side, the hotel investment

pipeline has expanded in terms of property

count, with 75 medium-term projects identified,

but the number of additional rooms in

expectation has declined 15% to 8,400 over the

three years to the end of 2017

– As a share of current stock, this translates toaverage supply growth of 1.2% p.a. over the

next three years – that is, less than half the

pace of demand

• Consequently, nation-wide occupancies are

forecasts to pass 71% by December 2017, the

second modest upward revision in two releases

of this publication. By that stage, ten years

on from the start of the GFC, the decline in

performance will increasingly appear as a speed

hump in a record of otherwise continual growth

over the past 15-20 years

• Nationally, room rates are forecast to grow3.5% p.a. and RevPAR 4.9% p.a. to December

2017 – a pace slightly faster than historically

observed, but relatively modest given the

theoretical prospect of increased price rationing

at record occupancies

• Sydney and Melbourne will continue to lead

trend room rate growth, forecast to be positive

in all markets, albeit suppressed in some cases by

large amounts of supply (i.e. Perth), or subdued

demand (i.e. Canberra)

• RevPAR growth is likely be led by the relative

minnow, Hobart, with limited supply additions,

and strong demand growth.


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Positive outlook for key tourism driversThe primary drivers of tourism growth have moved almost universally

positively over recent months. In fact, the outlook for tourism has not been

more encouraging since the global financial crisis.

Forecast for continued growth in the medium termEmerging Asia will continue to be the driving force – accounting for

60% of total growth – but the outlook for several of Australia’s traditionalmarkets is also strengthening.

THREE-YEAR FORECAST GDP GROWTH

AUSTRALIAN DOLLAR IN 2014

NORTHAMERICA

UNITEDKINGDOM

EUROPE

NEWZEALAND

CHINA

OTHER

S.E ASIA(INCL. INDIA)

WORLD

OIL PRICES IN 2014 OTHER FACTORS

CHINA US SOUTH-EAST ASIAUK

6.8%

-9% -50% 7.4bn

2.9% 2.4% 6.5%

• Destination marketing and major events

• Short stay accommodation: a pipeline of

4.8%

4.3%

2.7% 3.8%

3.4%

8.4%

8.8%

7.4%5.7%

JAPAN/ KOREA

Note: circle size denotes the market volume, percentages shown are three year forecasts


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About the Tourism Hotel Market OutlookThis document presents a snapshot of Deloitte Access Economics’ Tourism Hotel Market Outlook, which

is available via subscription by contacting Bryon Merzeo at [email protected]

The Tourism and Hotel Market Outlook provides in-depth analysis of recent trends and their underlying drivers, across the domestic

and international tourism sectors and ten of the country’s major hotel markets (including all capital cities).

Against the backdrop of Deloitte Access Economics’ latest economic forecasts, projections are provided for domestic and

international tourism over the next three years. Building on projected travel demand and utilising our in-house registry of short stay

accommodation projects, detailed three-year forecasts are provided for hotel market performance against room rates, RevPAR and

occupancy. Data and forecasts are accompanied by detailed commentary of market drivers and performance determinants. Besides

the national perspective, the hotel market outlook is divided into separate sections for each of the major hotel markets as shown in

the map above:

– Sydney – Canberra

– Melbourne – Darwin

– Brisbane – Gold Coast

– Perth – Tropical North Queensland

– Adelaide – Hobart

While the figures presented in this publication are the product of a forecasting methodology developed over 15 years, and drawingon a wide range of forecasts, the Outlook is designed for a general audience. To discuss how the capability used here can be tailored

to suit your needs, please contact us (contact details overleaf).

YEAR-ON-YEAR ROOM RATE GROWTH 2013-2014

ADELAIDE

BRISBANE

SYDNEY

MELBOURNE

HOBART

DARWIN

GOLD COAST

PERTH

TROPICAL NORTHQUEENSLAND

CANBERRA

+1.1%

+1.9%

+3.4%

+2.5%

+2.7%

+4.4%

+4.3%

-3.9%

-3.0%

-0.4%


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Contact us

For further information on how we can support your business needs, please

contact one of our Travel, Hospitality and Leisure specialists:

Lachlan Smirl

Leader, Tourism and Hotels

Tel: +61 3 9671 7567

[email protected]

Damian Winterburn

Deloitte Capland Real Estate Advisory

Tel: +61 7 3308 1200

[email protected]

Bryon Merzeo

Consultant, Tourism and Hotels

Tel: +61 415 229 200

[email protected]

Simon Cook

National Leader, Consumer Business

Tel: +61 2 9322 7739

[email protected]

Limitation of our work

General use restriction

This report is not intended to and should not be used or relied upon by anyone else and we accept no duty of careto any other person or entity. The report has been prepared for the purpose of providing an outlook on hotel industry

performance in Australia. You should not refer to or use our name or the advice for any other purpose.

Deloitte is recognised as one of the leading global advisors to the Tourism, Hospitality and Leisure industry, with a practice

of more than 2000 professionals. In Australia, our multidisciplinary group of industry specialists have a deep knowledge

of the market issues and business challenges faced by the industry.

Your industry, our expertise

Our dedicated practice provides a wide range of services to financiers, property owners, investment fund managers,

private investors, developers, operators, government departments, professional and business groups and tourism intermediaries.

We offer a full range of services to address key industry issues associated with economic conditions, regulatory change,

competition, emerging market sectors, technological advancements, mergers & acquisitions, and changing needs of investors.

Deloitte Access Economics specialises in providing economic modelling and public policy advice to the tourism industry,

with extensive experience in forecasting and projections, econometric analysis, economic impact studies across both government

and the private sector.


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