APPD Market Report Article

Sydney

December 1, 2021

-16.0%

AUD 75

RevPAR
Rising

Domestic leisure continues to lead the recovery

  • Prior to the most recent extended lockdown, domestic leisure demand was leading the recovery and green shoots in respect of emerging corporate demand were becoming evident. Subsequent to this, resurgences of COVID-19 cases have slowed the pace of recovery. Whilst trading conditions are likely to be constrained over the near term, it is evident that a recovery had begun prior to the lockdown.
  • The market continues to be materially affected by the ongoing impact of COVID-19, illustrated by YTD September 2021 occupancy of 36.7% versus 43.1% for the same period last year; however, materially below the same period in 2019, which was 85.5%.

No new hotel scheduled for opening in 3Q21

  • Whilst 543 rooms opened in the first 9 months of 2021 representing 2.6% of Sydney’s total room stock, a further 1,820 rooms are currently under construction, representing an increase of 8.74% on existing stock. The remaining 2021 openings are anticipated to add 129 rooms (0.6% on existing stock). The expiry of quarantine hotel contracts will result in an enhanced competitive environment.
  • There are a further 6 hotels under construction, comprising 1,621 rooms (8.1% on existing stock) due for completion between 2022 and 2024. Going forward, whilst there are several proposed or mooted hotels, we expect delay and/or cancellation of some projects (supply attrition), which should assist longer-term market recovery.

COVID-19 continues to significantly affect EBITDA

  • Whilst vaccination rates are climbing and travel and social distancing restrictions are easing, some concern in respect to resurgences of cases and the pace of recovery remain.
  • Owners and operators continued to be required to contain operational costs whilst positioning their business to capitalise on the emerging recovery.

Outlook: Progressive recovery anticipated

  • Whilst trading conditions will continue to be constrained over the near term, prior to the recent lockdown, there was evidence the recovery had begun. The market recovery is dependent on the free movement of travel interstate and eventually internationally, which is anticipated to progressively recover.
  • 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 that 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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