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New hotels ramp up pressure on capital city occupancy

Melbourne’s hotel development continues apace despite warnings rampant development could drive down revenue and occupancy for operators across the city.

New Southbank tower. Image supplied

A new luxury hotel will grace the burgeoning Southbank area from 2024, the announcement coming less than a week after plans were revealed for a new Sebel at Moonee Ponds some ten kilometres to its north.

Operators are being sought for the 199-room Southbank hotel, which boasts a restaurant and bar, gym, two pools and rooftop sky garden and is part of a striking 69-storey mixed-use tower planned for Clarke Street including residential apartments and co-working spaces.

Accor last week announced the new-build Sebel Melbourne Moonee Ponds will open at 41 Homer Street in Mason Square from November, offering 97 services apartments, fitness and meeting spaces, a restaurant and ground floor retailers and cafes.

Approximately 17,000 rooms are currently under construction in Victoria out of a total development pipeline of 53,000 across the country.

Over the course of the next four years, a total of 8,100 hotel rooms will be added to Melbourne’s CBD, Southbank and Docklands.

Despite the increase in supply Melbourne’s hotel returns have so far held firm, with the city maintaining an occupancy rate above 84 per cent and average daily rates around $198 a night according to data analysts STR. Revenue per available room has remained steady despite several new additions to the market and a booming short-stay sector.

However, Melbourne’s development picture mirrors that of Perth, where influxes of new hotel rooms have resulted in significant falls in revenue per available room and occupancy.

The WA capital welcomed a new ibis Styles this week, adding 252 economy guest rooms to East Perth’s hotel supply through the world’s first high-rise modular hotel at 69 Adelaide Terrace. The development, described by tourism minister Paul Papalia as “an important part of Perth’s transformation”, is one of a raft of major developments due to open this year putting pressure on local hoteliers and their revPAR and occupancy rates.

Adelaide is facing a similar rapid hotel capacity expansion, Australian Hotels Association SA chief Ian Horne describing the development boom as “unsustainable” and saying the city’s hotel operators already struggle to fill rooms in the off-season.

A Deloitte Access Economics report released earlier this year predicted Melbourne and Perth would both see occupancy affected over the next three years as they struggle to absorb new room pipeline.

“Melbourne and Perth are likely to edge below 80 percent and 70 percent respectively in 2020,” it said of occupancy levels. “Average room rates are also expected to be impacted.”

Developers of the newly announced developments are not daunted by the pace of accom growth across the nation’s capitals.

Andrew Taylor, managing director of Cre8tive Property which is managing the operator selection process for the new Southbank hotel, described as “incredibly exciting” the move to “bring the vibrancy that lifestyle hotels embody” to the area.

“The City of Melbourne has committed significant funds to transform the Southbank area to secure its reputation as a premier arts and cultural destination. The transformation the precinct is undergoing is huge and this development is in a premier position to capitalise on the investment,” he said.

Accor’s Pacific CEO, Simon McGrath, said of the new Melbourne Sebel: “Melbourne’s inner North West is set for a resurgence with the opening of the new Mason Square precinct, a major urban renewal development project for Moonee Ponds. Accor strategically jumped at the opportunity to introduce the international upscale serviced apartment brand to the precinct.”

Of the new ibis Styles in Perth, he said: “Quality, comfort, great aesthetics and genuinely warm service. These are all at the top of the wish list for budget-conscious travellers, and what ibis Styles East Perth delivers – at an affordable price.”  

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