Melbourne and Sydney set for modest hotel rate rises, but strong pipeline could see Brisbane and Perth levels slip

The recently released ‘The Hotel Monitor 2020’, from the Global Business Consulting team at American Express Global Business Travel (GBT) showed an expected steady growth globally for most key cities. In Australia growth was predicted for both of the countries biggest cities with rates in Melbourne sit to eclipse those in Sydney.

Melbourne is expected to see a +2% increase in room rates in 2020. The fourth-fastest growing city in the developed world, growing by 125,000 people a year, Melbourne is predicted to be Australia’s biggest city by 2028. The +2% increase in room rates would seem to reflect the steady growth of Melbourne as a key business travel destination in Australia.

However, Sydney, currently the main gateway to Australia, is only expected to see a +1% increase in room rates in 2020. Sydney often has high occupancy in its limited rooms, so it’s an interesting observation that no major changes are expected in its hotel pricing for 2020.

As The Blue Swan Daily reported earlier this week, when taking a global consideration hotel prices in most key cities will experience “only modest rises” in 2020, according to GBT’s Hotel Monitor 2020 report. The study predicts that a global boom in hotel construction is increasing the supply of guest rooms just as international trade tensions put a dampener on demand. Together, it says, these factors “will restrict the ability of hotels to raise room rates in many business destinations”.

Jo Sully, vice president and regional general manager of American Express Global Business Travel, says the rise of hotel prices in Australia for 2020 are “reflective of steady growth in what is one of the Australia-Pacific’s most important business travel destinations”. “Sydney and Melbourne are key destinations for business in Australia, and it’s great to see these destinations continue to contribute to the local economy, at a slow yet steady rate,” she explains.

Across the wider Asia Pacific region the hospitality industry is growing rapidly with thousands of additional beds in key cities every year. Despite the added capacity, the GBT report says “sustained demand in these growth economies” means rates are likely to increase. It notes that domestic travellers are increasingly filling hotel beds, compensating for any falls in international visitor numbers stemming from a less optimistic global economic outlook.

Across much of the world, the hotel industry is booming with business and leisure volumes growing. A healthy global hotel construction pipeline should mean, in most cities, that hotel rates remain stable or see only modest rises. However, a significant increase in supply could impact smaller outlier cities and GBT predicts some are likely to see more pronounced price moves. This is evident in its 2020 forecast for both Brisbane and Perth, where rates are predicted to fall -4% and -3%, respectively.

The following infographic from travel industry advisory consultancy 4th Dimension highlights that future pipeline and helps understand those proposed rate changes for 2020. The listing is a comprehensive list of new property openings and refurbishments across Australia and New Zealand through to the end of 2020. It shows 44 new openings planned for the year ahead with the current 3Q 2019 period the busiest for ribbon cuttings with 13 new properties scheduled to open.