Tourism Investment Monitor 2019–20

Views from our tourism investment specialist

The disruption to the tourism sector in 2020 has been unprecedented.  The immediate halt to people movement to prevent the spread of Covid-19 has been significant to the industry in Australia and worldwide. This has deeply affected the hotel investment market with a large drop in deals, construction, activity, and scheduled openings.  Most of the hotel transactions in Australia in 2020 were limited to those that were in train prior to the pandemic.

The Australian Government’s response, including JobKeeper and temporary changes to the Hospitality Industry (General) Award, enabled businesses to retain staff through the lock-down period. It is expected that as this support unwinds and the economic landscape becomes clearer there will be an increase of transactional activity as assets come to market.

The tourism sector is experiencing varying recovery rates. Regional drive markets within 90 minutes of capital cities have seen holiday and weekend periods providing strong visitor demand with room rates being maintained.  Many tourist areas within 3 hours of capital cities have experienced record high winter occupancies, and prior to state border closures, demand was edging toward a return to 2019 levels.  However, this was not the case in Victoria, which encountered a second wave of Covid-19 infections which led to a statewide shutdown.

A small number of capital city hotels have seen artificial demand driven by the quarantine requirements for arrivals.  The predicted slow return of corporate travel and international visitation is expected to result in a sluggish recovery for capital city assets however they are largely expected to maintain their value.

Despite these challenges, investment has continued. Investors from our major investment markets are watching Australian assets with interest given that more than two thirds of Australia’s tourism spending comes from domestic travellers.  In June in Melbourne the settlement by Japan’s Daisho of the W Hotel was heralded as Australia’s largest hotel deal. The Bower Byron Bay sold in August for a purported record price per key for that region (Source: The Urban Developer, Byron’s Bower Breaks Covid-19 Hotel Sales Drought, 2020).  In September Brisbane saw the sale of the Art Series Fantauzzo hotel to Crystalbrook in an off-market deal.  Consumer sentiment being tracked by Tourism Australia is indicating pent-up demand for domestic travel, leading to the launch of a domestic tourism campaign.

Australians are traditionally net exporters of travel, spending $65 billion on international travel in 2019.  It is expected with the opening of state borders, a significant share of those outbound dollars will be spent domestically. This will assist to prop up the local industry until international travel returns, which could start to occur from late 2021.

Emma McDonald
Head of Infrastructure and Tourism
Austrade