APPD Market Report Article


September 4, 2023

Anthony Corbett, Managing Director - Head of Hotels & Hospitality, Valuations Advisory, Australia


AUD 229


MICE and corporate demand continues to steadily recover

  • Demand continues to be largely led by the domestic leisure segment, with room night demand, average daily rate (ADR) and occupancy peaking in the lead up to, and during, numerous major events on the calendar, such as World Pride and Vivid Sydney. Additionally, the steady recovery in corporate/MICE demand and international arrivals has supported strong demand growth over the quarter.
  • Occupancy as at YTD June 2023 improved to 75.2%, versus 52.4% for the same period last year. Despite this, market occupancy continues to be below pre-pandemic levels, illustrated by a pre-COVID-19 occupancy rate of 85.9% for the same period in 2019.

No new hotels opens over the quarter

  • A total of 352 rooms opened in the 12 months to June 2023, representing 1.6% of total room stock. These included the 192-room Capella Sydney, a 38-room boutique hotel, 202 Elizabeth (formally The Clancy) and the 122-room Porter House Hotel Sydney – MGallery.
  • Six new hotels are currently under construction in Sydney CBD and surrounding fringe suburbs, representing a net increase of 1,441 rooms or 6.4% on existing stock. Future development activity is expected to be relatively constrained over the near term, given feasibility challenges, rising interest rates, increasing construction costs and the availability of development finance.

Uplift in occupancy and elevated ADRs supporting RevPAR

  • As at YTD June 2023, revenue per available room (RevPAR) increased to sit at AUD 229, which represents a 59% increase from the previous year, and has now recovered to be 6% above pre-COVID-19 levels (YTD June 2019). This recovery has been supported by elevated ADR levels and a strong recovery in market occupancy (44% y-o-y), however despite this, occupancy remains 12% down on pre-COVID-19 levels.
  • Sydney has recorded the strongest investment volumes of any city across the country over the past 18 months to June 2023, with in excess of AUD 1.6 billion of transactions settling (across ten deals). This includes the significant landmark transaction of the future Waldorf Astoria Sydney for a reported AUD 520 million, which is currently under construction and scheduled to open in 2026.

Outlook: Despite headwinds, market recovery anticipated to continue

  • We are seeing increasing pressure on the domestic leisure segment, as interest rate rises curb consumers discretionary spending and the pick-up in outbound travel continues. Despite this, Sydney is set to benefit from a significant events calendar, steady recovery of business travel and corporate/MICE segments, as well as the continued rebound in international visitor arrivals.
  • Investment appetite in Sydney continues to remain strong, but highly selective, with a clear trend of ‘flight to quality’ occurring. Transaction activity is predominately targeting aspirational assets, be that trophy or strategic, and non-performing assets with genuine value-add and upside potential, be that through refurbishment, repositioning, or redevelopment.

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

Talk to us 
about real estate markets.