Six out of 12 hotel markets surveyed experienced an increase in demand in 2001 compared to 2000, including Brisbane, Cairns, the Gold Coast, Northern Territory, Tropical North Queensland and Canberra.  Demand for hotels surveyed in Melbourne CBD and Sydney CBD declined marginally by 1.7 percent and 2.3 percent respectively, with Perth hotels recording the biggest decline in demand of 5.2 percent. 

Positive demand conditions, coupled with limited additions to supply, created a favorable platform for occupancy and, to a lesser extent, rate growth, resulting in firmer room yields in several markets. Survey results indicate that Brisbane was the best performing market in terms of revenue per available room (revPAR), recording an exceptional 10 percent increase relative to 2000.  Queensland markets followed suit, with revPAR in Cairns and the Gold Coast increasing by 3.5 percent and 3.2 percent respectively.  Limited additions to supply, a strong events calendar and increased MICE activity were the key performance drivers in these markets. 

In absolute terms, Melbourne CBD was the best performing hotel market in Australia, recording revPAR of AUD$120, with average occupancies of 73 percent and room rates of AUD$162. 

Sydney CBD hotels achieved the highest rate across all Australian markets of AUD$165 in 2001; however, a significant drop in occupancies to 68 percent resulted in lower revPAR of AUD$112, forcing Sydney to relinquish its best performing market position held in the 2000 Olympic year.  The Northern Territory, Adelaide and Brisbane were also placed in the top five best performing hotel markets in terms of revPAR.

An analysis of survey results on a quarter by quarter basis indicates that the decline in performance in some markets, including Sydney and Melbourne, was already evident in the lead up to September 2001. In fact, Sydney hotels had already experienced a revPAR decline of 19 percent in the first three quarters of 2001. This would indicate that the decline is likely more reflective of the disparity between higher room rates and demand experienced by Sydney hotels during the Olympic Games, with softer market conditions prevalent from the start of the year.  Melbourne and Perth also demonstrated a similar declining revPAR trend, compounded by a weaker fourth quarter. 

Commenting on the results and subsequent analysis, Rutger Smits, Director of Hospitality and Leisure Services in Australia said, �despite widespread sensationalism in reporting the impacts of September 11 and Ansett�s demise on the Australian hotel industry, trend results across 2001 support the assertion that numerous markets were already heading towards the trough of the hotel performance cycle before September.  The downturn in the US economy, continued supply effects in important markets such as Sydney and Melbourne and a general softening in corporate and inbound demand were common concerns before the tragic events of September.  In several instances, final quarter results merely compounded a weakened year-to- September performance�. 

As to be expected, the hardest hit markets in the fourth quarter were long-haul destinations with a strong reliance on air transport and significant exposure to international markets.  Survey results indicate that Cairns, Tropical North Queensland, Northern Territory and Hobart hotels recorded a significant decline in demand in the fourth quarter 2001 relative to 2000 and out of line with strong revPAR growth recorded in the first three quarters of the year. 

Not all of the news for the fourth quarter was negative.  Brisbane and Adelaide actually achieved improved revPAR performance relative to the fourth quarter of 2000, Brisbane driven by stronger occupancies and Adelaide by rate growth. 

Regional drive markets also emerged as fourth quarter winners as car travel and domestic holidays took on a greater appeal following the events of September 2001.

The Gold Coast achieved revPAR 13 percent higher in the fourth quarter relative to the previous three quarters, benefiting from a surge in demand from east coast domestic travellers utilising private vehicle transport.  Regional NSW hotels improved revPAR in the fourth quarter, although still remained below 2000 levels.  The Northern Territory lost ground in the fourth quarter with revPAR falling by five percent relative to the same period in 2000, dragging down year-to-date gains. However, hoteliers managed to offset the decline in demand with average rate gains, which may be attributed to a re-shift in demand in higher yielding free and independent travellers (FIT) and domestic leisure travellers compared to more price sensitive inbound group business.

�If any positive can be derived from the effects of September, it would be that operators were forced to take swift and serious steps to mitigate the impacts of reduced demand to protect their bottom lines�, said Smits.  �The shedding of staff, streamlining of operational processes and revisions of marketing strategies were critical business decisions in mitigating damage already incurred and realigning strategies for potentially leaner times going forward�, he continued.

�The strength of the relationship between tourism, accommodation demand and economic cycles will dictate the timing and speed of growth in accommodation demand in Australia.  The overall demand picture remains positive, and limited additions to supply across most markets should allow hoteliers to make some occupancy and rate gains.  By mid to late 2002, the relative strength in the Australian economy and renewed optimism in the business investment environment is likely to stimulate corporate and meeting related sectors.  Anticipating the response for inbound leisure travellers is difficult.  However, timing aside, sentiment as it pertains to economic and political outlook will shape the speed of international demand resurgence�, said Smits. 

Andersen�s comprehensive overview of hotel operating performance for Australian cities, including market-by-market analysis is available to order now.  For your copy of the 2002 Andersen Hotel Industry Benchmark Survey Annual Report, contact Paula Drayton on 61 (0) 2 9993 3416 or [email protected]

Andersen is the brand name for the global network of professional services firms coordinated by Andersen Worldwide SC.  Andersen, through its member firms, is a global leader in providing integrated solutions that draw on diverse and deep competencies in assurance, tax, consulting, corporate finance, and in some countries, legal services.  

Launched in 1996 as the definitive source of hotel performance data outside North America, the Andersen Hotel Industry Benchmark Survey collates data from more than 5,500 hotels in 300 markets across 140 countries.  The survey currently tracks hotel performance everywhere outside North America.