APPD Market Report Article


May 31, 2022


AUD 106


Momentum of corporate recovery continues

  • With the easing of restrictions, strong growth in demand was evident in 1Q22. A progressive recovery is anticipated to continue, assisted by the free movement of travel interstate and open international borders. Market recovery is predicted to fall in line with improved domestic air capacity over the short to medium term and international air capacity over the medium to longer term.
  • Occupancy as at YTD March 2022 improved to 40.5% y-o-y versus 37.4% y-o-y for the same period last year. However, the market continued to be materially affected by the ongoing impact of COVID-19, illustrated by a pre-COVID-19 occupancy rate of 88.1% for the same period in 2019.

No new hotels scheduled for opening in 1Q22

  • Eight properties are currently under construction representing an increase of 8.8% on existing stock. 2022 openings are anticipated to add 1,017 rooms (4.6%).
  • A further 666 rooms are anticipated to be added, increasing total room stock by 3.1% in 2023; and 220 rooms are too be added in 2024, increasing total room stock further by 1%.

EBITDA begins to improve

  • With revenue improving and significant cost savings being achieved by owners over the last 2 years, we are seeing EBITDA recover.
  • Whilst the sector post COVID-19 has improved operating efficiency, the downside of this is a labour shortage and anticipated upward pressure on payroll costs.

Outlook: Progressive recovery continues to be anticipated

  • Trading conditions will continue to be constrained over the near term.
  • Investors continue to seek acquisition opportunities for quality assets and transactional activity has been increasing, signalling confidence in a medium to longer-term recovery. Some transactions of non-performing assets are occurring for alternate use/redevelopment and we expect this trend to continue whilst the sub-optimal trading conditions exist.

Note: Sydney Hotels refers to all grades of accommodation and includes both hotels and serviced apartments.

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