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Serviced apartments strong performers

Serviced apartments have been the strongest performer in the industry over the past decade. While hotels and motels, have struggled in the wake of declining domestic tourism, a high Australian dollar and global economic uncertainty.

According to IBISWorld industry analyst Ryan Lin, “the Serviced Apartments industry has gained market share and grown revenue in all but one of the past 10 years”. In the five years through 2013-14, IBISWorld expects revenue will increase by an annualised 3.1% to $3.0 billion.

While the Serviced Apartment industry is strongly placed among accommodation competitors, the industry has battled a strong Australian dollar and cheap international airfares for much of the past five years. These factors are driving Australian tourists overseas at the expense of the domestic tourism market, meaning serviced apartment operators in Australia’s traditional getaways, such as the Gold Coast and Sunshine Coast in Queensland, are struggling relative to capital city markets. “Alleviating the dearth of domestic tourists has been strong demand from business travellers, which is contributing to high occupancy rates and growing room rates in Australia’s capital cities,” says Lin. In 2013-14, industry revenue growth is projected to be positive, with a fall in the strength of the Australian dollar and increasing number of inbound tourists and domestic tourism activity contributing to a 4.7% rise in revenue.

Over the next five years, the supply of new rooms is expected to keep pace with demand as investment remains strong. Serviced apartments are the only feasible form of accommodation development in many areas and their flexible financing structure has contributed to the rapid growth in the number of serviced apartments over the past five years. The Serviced Apartments industry has the strongest fundamentals for growth in the travel-accommodation market.

Demand from both international tourists and business travellers is expected to improve over the next five years, helped by an easing Australian dollar and improving global economic conditions. As Asian travellers begin to dominate the Australian tourism market, serviced apartment operators need to find a way to gain a greater share of this market. The industry has proven to be adaptable to consumer preferences in the past and should thrive on this challenge.

For more information, visit IBISWorld’s Serviced Apartments in Australia industry report

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