22
CDL
HOSPITALITY TRUSTS
MARKET REVIEW
Perth, Australia
Hotel Property Sector as of 1 March 2015
PERTH TOURISM MARKET
In the 2013/14 financial year there were 749,307 international
visitors to Perth, equating to approximately 94% of total
international visitors to Western Australia, who spent
21,087,743 visitor nights in the region. Major source markets
include United Kingdom, Singapore and New Zealand. The
average length of stay by international visitors remains in
excess of 28 nights.
In the same period, Perth attracted 81% of the domestic
visitors to Western Australia, equating to 2,188,638 annual
visits and 11,670,436 visitor nights. The length of stay would
be considered lower than other states due to the fly-in fly-out
nature of the mining sector associated with Western Australia.
HOTEL MARKET PERFORMANCE
The Perth market has, for the past decade, enjoyed very strong
business orientated demand which has seen most of the city
running at 90% plus occupancy levels mid-week; however
weekend demand which is typically leisure based produces
substantially reduced occupancy. The limited new room
supply and consistently strong demand levels have produced
both high occupancy levels and average room rates.
The results from the Australian Bureau of Statistics survey data
reflects a slowing rate of growth, largely due to the stalling of
the market in the second quarter. Nevertheless, the average
annual rate of RevPAR growth over the past five years is a
strong 6.1%. Discussions with market participants suggest
that Perth’s accommodation market has a direct link with
resource exploration and mineral exports. Direct comparison
with trading results in the Perth CBD does correlate in respect
of declining average room rates, however room demand as
measured by occupancy levels does not reflect this downward
sentiment. Market information suggests that Room Demand
has grown slightly within Perth, however the ability for
hotels to benefit from late call high yielding opportunities
has diminished resulting in decreased Average Daily Rate
("
ADR
") levels by some 5.0% per annum on a rolling twelve
month basis.
EXISTING AND FUTURE SUPPLY
The Perth hotel market has enjoyed a relatively stable
supply for a number of years. Within the CBD there are
limited projects currently under construction but a large
number mooted to be undertaken over the coming five year
window. Recently completed developments in the Perth CBD
(east and west core) include the Fraser Suites (236 apartments)
and the Terrace Hotel (15 rooms).
There are a number of developments still known to be
under consideration or in progress. If all these projects were
to come to fruition it would represent a 60% increase on
current room stock. Inevitably not all these mooted projects
will progress to completion. In terms of within our market
outlook for Perth, we anticipate an increase in supply of some
2,350 over the coming five years.
Additions to room supply will start occurring over the next two
years. Over this short-term period we anticipate growth in
room demand simply on the basis that there are more rooms
available thus diminishing the level of would-be travellers
who in the past have been unable to travel due to lack of
available rooms at a reasonable price level. In our view the
additional supply of hotels will see a reversion of room tariffs
which are more appropriate to quality than has been present
in this market over the past several years.
HOTEL MARKET OUTLOOK
Our forecasts suggest that RevPAR will decrease slightly over
each of the next two years being driven by a lower average
market occupancy falling from the low 80%’s to mid to high
70%’s matched by room rate growth which is expected to fall
short of Perth CPI. Our longer-term forecasts for the Perth City
Market are based on an assessment that approximately half
the mooted developments will proceed effectively delivering
some 2,300+ new guest rooms over a period of five years.
Perhaps the biggest question market in respect of the Perth
Market is the level of demand which currently cannot be
serviced by room availability. Perth is typically not a drive-to
market and is therefore somewhat constrained by air seats
capacity. In our view additional room supply will be met with
stronger demand levels particularly from the Leisure market
which is a more price sensitive segment of the market and the
MICE segment. The growth factors applied on the demand
side of the equation indicates occupancy levels should
remain in the high 70%’s coupled with ADR growth at or just
below 2.5% per annum.
