Fears of a Perth hotel glut overstated: CBRE Hotels' David Kennedy

GUEST OBSERVER

Fears of a hotel glut in Perth are overstated, with more than 50% of the city’s current supply becoming potentially obsolete in the not too distant future and no rush sell-offs.

More than 50% of the current 6,710 existing rooms in the Burswood, Perth and West Perth areas were over 30 years old – and 32% over 40 years old. 

Besides the 48-room Como The Treasury hotel and The Richardson in West Perth, the city hasn’t received a new five-star hotel for some 30 years, however the tide has turned with a surge of development under construction across the city. 

Rather than an oversupply issue, we’re seeing a market shift – with new projects offering a range of high quality accommodation options across the city. This will take Perth in line with the other main capital city markets across the country.

The steady trading of hotels across Perth is also further evidence of the market’s resilience. Hotels are outperforming other sectors of the market, such as office, industrial and residential apartments.”

There has been a lot of speculation of a hotel glut, however, if there was real panic in the air, we would be seeing a sell-off of assets, whereby in reality, there is not one established city hotel for sale.  

Although hotel trading has continued to subside, they are still trading at very profitable levels, with an average daily rate of $200 and occupancies of 80%, which is above the national average.

CBRE’s Q1 Australia Hotel MarketView highlighted record tourist levels in 2015, with an 8% rise in international visitors to post 6.9 million and 7% spike in domestic tourism to 87 million. 

WA, along with NSW and QLD, emerged the top destinations for domestic travellers, accounting for 75% of national visitor nights in 2015.

The weakened Australian dollar is a major attraction for international visitors and also means domestic visitors are being forced to cut back on international travel and holiday locally. This is subsequently assisting occupancy rates across the Perth market.

In a further boost to the domestic hotel sector, the overnight spend on domestic trips increased 6% to $58 billion, while international spend was a record $24.5 billion – reflecting a jump of 20%. 

There are currently 1500 rooms under construction, with five star hotels including the Westin, Intercontinental and Crown at Burswood to complement the recently completed Como The Treasury hotel. 

There were also several demand drivers in play that would boost both existing as well as new hotels in the immediate to long term, such as: 

-   State government initiatives such as Elizabeth Quay, City Link the cultural centre, Cathedral Square and new Burswood Stadium. 

-   Consolidation of domestic and international airports will facilitate passenger movement to the city both by rail and vehicular. 

-   New hotels will attract more visitors by lifting the standard of accommodation, which is desperately needed. 

We will need to endure the economic gloom over the next 18 months, but that provides a prime time to develop. The predication is that Perth will sing in 2020 when government and private development is established and the economy rebounds.

Perth will be a truly international city, which it deserves to be.

The notes/comments are from CBRE Hotels Senior Director David Kennedy’s speech at a recent Perth Hotel and Venue Development seminar.