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Perth’s wave of new hotels forcing down the price of rooms: report

September 13, 2018

The newly reopened Melbourne Hotel, which was refurbished in 2018. Photo: Supplied

A wave of new hotels hitting the Perth market has contributed to the city experiencing the biggest drop in room rates in the country, according to the latest research.

The Savills Hotels quarterly update revealed that during the year to June, Perth’s revenue per available room (RevPar) declined by 3.3 per cent, to $121, the worst in the nation.

Australia-wide RevPar inceased 3.2 per cent, while the best performing markets were the Gold Coast (up 14.4 per cent), Darwin (6.8 per cent) and Adelaide (3.6 per cent).

Savills hotel valuations national director Adrian Archer said the number of new rooms  – which had increased about 10 per cent – had been exceeding demand, which had risen only 5 per cent.

About a decade ago, the hotel market was booming due to strong demand from the resources industry, coupled with very few new hotels, he said.

The QT Hotel in Perth. Photo: Supplied The QT Hotel in Perth. Photo: Supplied

“Developments of new hotels lagged the demand so it took a while for new supply to catch on, but it certainly caught on in a very strong way,” he said.

“What we had was a significant amount of new supply going on right at the point where mining and resource demand started to slump.

Savills hotels managing director Michael Simpson said during the resources boom it was hard to get real growth in ‘leisure’ rooms “when there were some not-amazing hotels charging very high rates, where all of that was fuelled by corporate demand”.

“But now there are some real high-quality properties coming onto the market and the rates are low, so it’s fuelling growth in leisure tourism – domestic and international.”

Henry Vu, Colliers International investment services manager, said Perth’s hotel supply had increased significantly recently, with the opening of The Melbourne Hotel (73 rooms) and The Westin Perth (368 rooms) and a number of other significant developments during the past 18 months.

“This increase in supply has meant that operators have reduced average room rates to promote room uptake,” he said.

“Tourism markets are notoriously sensitive to currency fluctuations and the falling Australian dollar may make WA a more prominent tourism destination and improve hotel room uptake. A fall in vacancy rates would improve RevPAR across the board. However, with additional new hotel room supply still due to enter the market, it’s difficult at this stage to assess if improved visitor numbers could absorb the additional rooms.”

CBRE hotels director Ryan McGinnity said the RevPAR data was not a reflection of the market not performing, but rather one which was not absorbing a high amount of stock.

The Fragrance Group's apartment and hotel development on Murray Street. Photo: Supplied The Fragrance Group’s apartment and hotel development on Murray Street. Photo: Supplied

“I think between 2012 and now, there’s been over 2000 rooms (added) with over 2000 rooms under construction. It just takes a while for that to filter through,” he said.

Whether the current market conditions continue or not was largely dependent on the state of the economy and tourism numbers, which will be the biggest driver of the strength of WA’s hotel sector, Mr Vu said.

“The Australian dollar is trading close to a 20-month low and, when factored with expected seasonal improvements to tourism during spring and summer, hotel performance should improve at least in the short term,” he said.

“According to the latest figures from the ABS, WA’s economy expanded 0.2 per cent in the three months to June 30, taking annual growth to 1.3 per cent – it’s highest since 2013. In another encouraging sign, WA’s state final demand, a broad measure of the demand for goods and services in the economy, was up 1.3 per cent to $204 billion for the year ending June 2018.”

According to the Tourism Council, expenditure by international visitors to WA fell 5.5 per cent, the number of international tourists visiting WA declined 0.8 per cent and the number of visitor nights fell 7.7 per cent in the year to December 2017, Mr Vu said.

New hotels coming to Perth:

  • DoubleTree by Hilton, Northbridge
  • DoubleTree by Hilton, Perth waterfront
  • The Ritz-Carlton
  • Mantra on Hay
  • Planned hotel in Elizabeth Quay (Part of the Brookfield site)
  • Planned hotel in Capital Square
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