The 2019–20 tourism investment pipeline is the combined number and value of all significant tourism infrastructure projects with a valuation of $20 million and above. The pipeline is an indicator of confidence within the industry and its ability to grow and adapt.
Projects across the 3 main tourism sectors are captured in the pipeline. These are:
We analyse the activity in Australia’s tourism investment pipeline to show:
The monitor is to help you make informed decisions about whether to enter the market.
$43.6 billion | 255 projects
$14.3 billion | Down $1.6 billion compared with 2018-19 | 69 projects
$18.2 billion | Down $0.1 billion compared with 2018-19 | 18 projects
$11.1 billion | No change compared with 2018-19 | 168 projects | 27,200 rooms
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.
Head of Infrastructure and Tourism
The 2019–20 tourism investment pipeline consisted of 255 projects with a value of $43.6 billion. This was slightly lower than the value of the 2018–19 pipeline of $45.3 billion (down $1.7 billion).
Across the 3 tourism sectors, the pipeline was split by:
The pipeline includes 3 phases:
Projects that have recently opened, or been abandoned or deferred, are deemed to have exited the pipeline in that year.
In 2019– 20 there were:
Most of the projects in the accommodation and arts, recreation and business services space were in the planning phase. However, due to the long-term nature and complexity of aviation projects, most were under construction.
The investment pipeline excludes mixed-use developments. These are a combination of short-term accommodation, and residential, commercial or leisure spaces. Although they were not included in the pipeline, mixed-use developments offer significant value to Australian tourism.
Over the last 3 years, mixed-use investments included more hotel rooms than stand-alone accommodation. In 2017–18 mixed-use investments surged. This reflects the growing popularity of these investments from the Asian market.
In 2019–20 there were 148 mixed-use developments valued at $57.9 billion with the potential to add 29,800 rooms to accommodation supply. By comparison, the 2018–19 pipeline contained 150 projects, valued at $55.8 billion with the potential to add 30,600 rooms. While the value of mixed-use developments increased by $2.1 billion in 2019-20, the overall rooms and number of projects has fallen. This indicates greater investment in the non-tourism component of these developments such as residences and offices spaces.
The number of rooms fell slightly in 2019–20 compared to 2018–19. However, 2,300 rooms were introduced into accommodation supply due to completions.
The tourism investment pipeline shows large variation in the type of investments across each state and territory. The tourism industry in each jurisdiction varies quite significantly, and the pipeline reflects this. For example, the Australian Capital Territory has a greater reliance on business travel, with a strong international student cohort. In contrast, Western Australia relies on domestic intrastate travel with a wide area to cover.
The Australian tourism industry has had sustained growth over the last decade from both the domestic and international markets. Over the 10 years since 2009:
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This strong increase in visitation has attracted ongoing investment into Australia’s tourism industry. The investment pipeline has been consistently valued at over $40 billion over the past 3 years. Continued investment has helped ensure Australia’s supply of accommodation, transport, and entertainment meets domestic and international tourists’ needs.
The COVID-19 pandemic has caused severe disruptions to demand for tourism, both globally and in Australia. The industry experienced:
Australia’s proactive management approach to the pandemic has played a key role in protecting domestic demand for tourism. The general success in containing the virus has further improved the perception of safety for Australian tourism destinations.
In late September 2020, two-thirds of Australians stated they felt safe to travel within Australia. This was up from 45% in late July 2020. However, only:
(Source: Tourism Australia, Travel sentiment tracker, 2020)
The COVID-19 impacts on aviation were immediate and severe. They forced the industry to adapt quickly in the face of mass disruptions.
In the accommodation sector the impact has not been felt evenly across the country.
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(Chart source: STR, Australian Accommodation Monitor, 2019–20)
There have been many short-term changes for Australia’s tourism landscape.
Domestic demand for tourism has remained strong, despite ongoing disruptions to the tourism industry. For example, as soon as mobility restrictions were eased, or state borders opened, there was immediate interest in bookings for accommodation venues and reinstated flights. Local travel vouchers were also being purchased within minutes of becoming available. This is one of many reasons why the Australian tourism industry still provides attractive investment prospects over the longer term.
Current positive trends need to be considered with a measure of caution. While it is possible that Australian tourism could return to pre-COVID-19 levels, bookings are still significantly lower than 2018–19 levels.
The COVID-19 pandemic’s impacts on the Australian tourism landscape will likely continue for many years. Although there is still uncertainty, we expect the flow of projects transitioning through the pipeline to slow. Causes for this include:
Despite this uncertainty, only one stand-alone accommodation project and 7 mixed-use projects were abandoned. Instead most investors re-evaluating their projects have deferred or placed projects on hold until there is more certainty. This is partly due to the significant time and costs needed to get a large-scale investment project to the planning phase. A total of 23 projects were deferred in 2019–20 (compared with 11 in 2018–19). Most deferrals:
Slightly more than half of the deferrals were in the mixed-use accommodation space. Three projects were in the arts, recreation and business services sector.
The changing nature of the Australian tourism industry is likely to have a significant impact on tourism investment. Many of these changes aren’t tourism specific. They hinge on human behaviours and the way these might adapt through, and because of, the pandemic.
People will likely work more flexibly. This will reduce the need for office spaces in city centres and may reduce future business travel. This could have 2 major impacts:
A stronger consumer focus on hygiene, safety and preserving greater physical distances could see new opportunities for smaller and more spaced out establishments and establishments that demonstrate strong adherence to safety protocols without compromising the visitor experience.
People will shift towards outdoor and nature activities. Outdoor and nature activities have strong appeal as the world looks to recover from COVID-19. The reasons for this are economic and health-related:
The tourism industry has already experienced early signs of this. In the June quarter of 2020, domestic overnight trips involving arts heritage or social activities fell by more than 90%. In comparison, outdoor and nature activities fell only 60-75%. This was likely driven by a limited ability to participate in indoor activities.
Even when demand for arts and cultural activities recovers, COVID-safe restrictions such as capacity constraints will affect overall profitability for current and future ventures. This could have an impact on the arts, recreation and business services pipeline, with a future focus on outdoor activities and attractions.
People generally don’t stay home for a holiday. More than two-thirds of Australia’s population live in a state capital city. This means the 17.1 million people who reside in capital cities may be looking towards regional destinations. Only around 10% of domestic overnight trips are ‘intra-regional’. This means either more trips to nearby locations by car, or more reliance on domestic aviation for longer trips to other capital cities. Both of these could have an impact on the investment landscape.
The more likely event in the short-term is a shift towards short, drive getaways to nearby regional locations. 53% of hotel rooms were located in capital cities (151,707 rooms) in 2019–20 (Source: STR, Australian Accommodation Monitor, 2019–20). However, capital cities only received 50% of hotel nights.
While regional areas generally have lower occupancy rates, domestic holiday patterns focus on weekend and school holidays, which creates surge demand. Increased visitation to regional areas will need investment in new tourism infrastructure to meet growing demand.
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A surge in capital city breaks will increase the use of pre-existing tourism supply, particularly arts and recreation and accommodation. However, in the longer term it may strain the current transport and access infrastructure.
$12.8 billion | Down $1.6 billion compared with 2018-19 | 49 projects
$1.5 billion | No change compared with 2018-19 | 20 projects
$14.3 billion | Down $1.6 billion compared with 2018-19 | 69 projects
Arts, recreation and business services are a key driver of visitor demand. They:
With competition increasing they will remain a key part of the tourism landscape.
In 2019–20 there were 69 arts, recreation and business services projects in the pipeline valued at $14.3 billion. This was $1.6 billion lower than 2018–19. This fall in value was mostly driven by the completion of Stage 2 of the Melbourne Olympic Parks redevelopment and the Cultural and Social Museum in Perth. These are valued at more than $760 million, combined.
Some of the most prominent projects in the arts, recreation and business services pipeline included the:
About half of arts, recreation and business services projects were in the planning phase (34 projects). A further 27 projects were under construction, with only 4 entering the construction phase in 2019–20. This is much lower than the 11 projects that transitioned into the construction phase in 2018–19. This highlights the disturbances to construction due to the pandemic.
Three new projects entered the pipeline and 10 left through the year. Of those that left:
Arts, recreation and business services businesses were hit particularly hard by the pandemic. This is because they are limited by health and safety regulations and ongoing capacity constraints. Investments in arts and culture projects (including museums) were the most common investment type:
More than half of sports projects (9 projects valued at $2.2 billion) and almost half of arts and culture projects (11 projects valued at $2.6 billion) were still in the planning phase. Due to this, the impact of COVID-19 is expected to continue to play out.
$10.3 billion | No change compared with 2018-19 | 9 projects
$7.9 billion | Down $0.1 billion compared with 2018-19 | 9 projects
$18.2 billion | Down $0.1 billion compared with 2018-19 | 18 projects
Aviation will remain a vital component for growing Australia’s tourism industry going forward. This is because of Australia’s wide expanse and remote geographical location.
In 2019–20 there were 18 aviation projects. These were valued at $18.2 billion. These projects were evenly split between capital cities and regional locations. However, value was slightly skewed towards capital cities ($10.3 billion compared to $7.9 billion in regions). This is because of various large scale capital city projects including the:
No new projects entered the aviation pipeline in 2019–20. However, 2 projects left the pipeline: the expansion of the Busselton-Margaret River regional airport and the Whitsunday Coast Airport upgrade. These were valued at $110 million.
Thirteen projects were in the construction phase. These were valued at $10.0 billion. These investments were distributed across 6 states. The most activity occurred in:
Accommodation remains a key requirement for tourism. The changing behaviour of visitors will lead to a growing demand for diverse accommodation options. In recent years there has been a noticeable shift in the pipeline towards environmentally friendly and boutique accommodation investments. The average number of rooms per hotel reduced slightly.
The 2019-20 pipeline included 168 stand-alone accommodation projects. These were valued at $11.1 billion, with the potential to contribute 27,200 rooms into the tourism accommodation supply. This was 16 more projects than the 2018–19 pipeline. However, there was no change in the total value.
There were 32 new accommodation projects in 2019–20 pipeline. This was almost half of the number of new projects added in 2018–19. These projects were generally geared towards capital cities, and remained in the proposed and planning phases.
New projects were valued at $1.3 billion, with the potential to add 4,700 rooms. The average value of new developments has been falling over the last few years. However this is due to the size of hotels becoming smaller in response to visitor’s demand for more boutique and tailored accommodation options.
Notable new projects include:
Most projects in the 2019-20 pipeline were in the planning phase. There were a total of 102 projects in this phase. These were valued at $6.9 billion, with the potential to add 16,500 rooms. A further 51 projects were under construction. These were valued at $3.7 billion, with the potential to add 8,900 rooms.
Twenty projects worth at least $1.2 billion left the pipeline in 2019–20. Reasons include:
Another 6 hotels entered the pipeline and opened in 2019–20. This means the number of significant stand-alone hotel openings totalled 19. This was considerably lower than 2018–19, which had 32 new hotel openings.
Most projects were located in capital cities. 114 out of 168 projects were in capitals. The total value of capital city projects was $8.3 billion. The highest value investments were in:
By comparison, projects in regional locations were valued at $2.8 billion and mostly distributed across:
$46.1 billion | Up $1.8 billion compared with 2018-19 | 111 projects | 22,800 rooms
$11.8 billion | Down $0.7 billion compared with 2018-19 | 37 projects | 6,900 rooms
$57.9 billion | Up $1.1 billion compared with 2018-19 | 148 projects | 29,800
Mixed-use developments have been increasing in popularity in recent years. They offer developers an option to diversify their investment. For a tourism development to be classified as mixed-use it needs to have:
In 2019–20 there were 148 mixed-use projects valued at $57.9 billion, with the potential to add 29,800 rooms. Three-quarters of these projects were located in capital cities, with Melbourne alone having 41 projects valued at $18.6 billion. Some key mixed-use developments in capital cities included:
Mixed-use developments have slowly become more popular in regional locations. The number of developments almost doubled over the last 3 years.
In 2019–20 there were 37 projects in regional destinations. These were valued at $11.8 billion, with the capacity to add 6,900 rooms. Some key mixed-use developments in regional Australia include:
Most mixed-use developments were in the planning phase. There were a total of 89 projects in this phase. They were valued at $31.0 billion, with the potential to add 17,900 rooms.
Forty-five more projects were under construction, valued at $22.3 billion, adding 10,000 rooms.
Fifteen mixed-use projects were completed in 2019–20. These projects were valued at $1.8 billion and introduced 2,300 rooms into accommodation supply.
Twelve projects valued at $1.9 billion were deferred and 7 projects were abandoned. These 19 projects had the potential to add 4,600 rooms to accommodation supply.
Three data sources are used to build the tourism investment pipeline database that underpins this report. The 2 main sources are Deloitte Access Economics’ (DAE) Investment Monitor and STR Global Asia Pacific’s Pipeline Database. The third source is the investment authorities within state governments.
DAE’s Investment Monitor details the total investment chain from pre-approval through to completion. This covers a number of industries (including accommodation) in five project phases:
DAE’s Investment Monitor only lists individual projects worth $20 million or more and excludes land costs. It does not include the number of rooms to be built in specific investments.
STR Global Asia Pacific’s Pipeline Database provides a summary of the number of hotel and resort pipeline projects, and recently opened hotels. It also provides the number of existing hotels to give a picture of current and future supply within Australia. The database details the investment pipeline chain in four project stages:
STR Global does not supply information on the value of all projects, but does include the number of rooms to be built.
We source project values from industry and media.
Input from state government investment authorities have provided additional insight for the tourism investment pipeline since 2016–17. This provides an additional layer of intelligence to help us compile a more comprehensive pipeline, with a focus on accommodation projects. We would like to acknowledge these organisations for their help:
When we construct a tourism investment pipeline database for the Tourism Investment Monitor, we categorise DAE and STR Global’s project phases in the following way:
The primary threshold for projects is $20 million or more. The project values and pipeline progression are as at year ending June 2020.
Abandoned projects are those that have exited the pipeline due to the investor choosing to permanently abandon the project.
Buildings primarily providing short-term or temporary accommodation on a commercial basis, including:
The arts, recreation and business services industry includes these entities:
National and international passenger and aircraft movements between domestic and international airports.
Deferred projects are those that have exited the pipeline due to the investor placing the project on hold. These projects may re-enter the pipeline at a later stage if the investor chooses to proceed with the project.
Includes the value of projects that have been submitted for approval. This includes:
Projects that are still possibilities or proposals at this stage. This includes projects that have not yet submitted council plans or have a project under council consideration.
The areas of a state or territory excluding its capital city tourism region.
Rooms available for accommodating short-term paying guests at each hotel and resort, motel, guest house, and serviced apartment during the survey period. Units, apartments and suites are treated as rooms for these types of establishments.
Refers to the sum of three Australian and New Zealand Standard Industrial Classification (ANZSIC) industry divisions. These are:
These industries were selected due to their importance for tourism and the availability of information from published sources.
Includes the values of projects that have commenced building. A project will remain in this phase until its official opening.