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Hotel construction in Australia still slow

By:
June 18, 2013

Hotel construction in Australia still slow

Australia’s constrained hotel development pipeline has recorded a 673-room increase in projects under construction over the past 10 months, according to new research. The increase was recorded in the Australian and New Zealand Hotel Development Register – June 2013, but the figure is coming off a low base and is underpinned by a number of large-scale, medium-term projects.

Despite the jump, the research shows that development activity in Australia’s major accommodation markets is expected to be fairly benign over the next few years, with high occupancy levels and capacity constraints expected to remain a feature of the Australian hotel investment landscape.

Highlights of the research include:

– Australia?s constrained hotel development pipeline has grown by 3536 rooms over the past 10 months, with the majority of rooms (57.7 per cent, or 4243 rooms) at the proposed phase.
– There are 7352 rooms currently in the development pipeline (under construction and proposed), which is well above the long-term average.
– Rooms under construction have increased by 27.5 per cent (671 rooms), with 13 projects evolving to the construction phase. Activity is highest in Melbourne (954 rooms under construction), Brisbane (756 rooms) and Adelaide (690 rooms).
– The number of likely proposed rooms has tripled ? albeit off a low base and underpinned by a number of large-scale, medium-term projects. On the whole, development activity remains benign and softer trading results are likely to hold back mooted projects evolving to the construction phase.
– Mooted accommodation rooms have declined significantly by 39.8 per cent (-2110 rooms) with 3197 rooms now being considered. Melbourne, Brisbane and Perth are attracting the most developer attention.
– The value of accommodation building work approved declined sharply during 2012 to total $910 million. This represented a reduction of 34 per cent on 2011 but an increase of 47.7 per cent on 2010 and is still a level, which is around 5.4 per cent below the long-term trend.

Despite the increase in the pipeline, of current known projects, room night supply across Australia?s major 10 accommodation markets is forecast to increase on average by only 1.2 per cent per annum over the period to 2017. This forecast assumes a slightly higher rate of growth of 2 per cent per annum, having allowed for an element of unanticipated supply and/or that some mooted projects will inevitably advance over the medium term.

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