Good times roll for Sydney, but brakes on for Perth

High-profile events led by the Invictus Games are expected to deliver a strong end to the year for Sydney’s hotels.

A series of big-name concerts, events and conferences will bring hordes of visitors to the NSW capital in the run up to Christmas, countering the effects on occupancy and daily rates of a slew of new accommodation opening across the city.

On the west coast, however, the picture is less rosy. Perth hotel rates are now some of the lowest in the country, averaging $165 compared to $221 in Sydney and $184 in Melbourne.

Jane Hastings, the chief executive of EVENT which has just opened QT Perth, delivered a sobering assessment of the city’s hotel market this week.

“At this point in the cycle, Perth is a tough market with negative market revenue per available room growth forecasted for the next three years,” she said.

“As a result, it will take at least three years for this investment to generate a positive contribution to earnings.”

Over the last few years, Westin Perth, InterContinental Perth and Aloft Perth have led a raft of hotel developments in the city.  But since the end of the resources boom, corporate demand has dropped and a city with a ten percent increase in rooms has only seen a five percent increase in demand for accommodation.

Sydney boasts occupancy levels of 87.2 percent, more than ten percent higher that Perth’s, although a dearth of winter events in the NSW capital is being blamed for a “dip” in room rate growth for investors.

“From an investment perspective, the missing ingredient this year has major events to drive average daily rate growth, which is currently hovering at around 1 percent compared to 7.2 percent last year,” said the manager of JLL’s Hotel and Hospitality group in Australia, Troy Craig.

However, Sydney remains one of the most sought-after hotel investment markets in the world, with high occupancy levels underpinning a confident outlook for average daily rate growth.

By comparison, Perth’s revenue per available room figures during the year to June made it the worst-performing major city across in the nation. New hotel developments opening across the WA capital signal that the prospect of higher rates and increased occupancy could be some years off. 

But it is not all doom and gloom for the West Australian capital.

Jane Hastings says EVENT believes in the Perth market in the long term – hence the investment in QT Perth.

Direct flights from Perth to London with Qantas and a falling Aussie dollar are positives for the city, and the state government has just announced a major new drive to attract Indian visitors, with Tourism WA committing funds to base a dedicated marketing representative in Mumbai.

Tourism minister Paul Papalia is currently meeting with Indian airlines in a bid to establish a direct service between India and Perth and boost a market currently worth $68 million – the ninth largest market in WA in terms of spend.

Sydney may be gearing up to host a stellar line-up of musicians over the summer, including Cher, Taylor Swift, Bon Jovi, Phil Collins, Def Leppard and Shania Twain.

But Perth’s new Optus Stadium is attracting major sports fixtures to the west coast, including an India v. Australia cricket test match in December and Bledisloe Cup and State of Origin games in 2019.

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