Tourism and visitation momentum accelerates as international arrivals continue to pick up

• Sydney Airport recently announced that total passenger traffic for YTD Q2 2025 reached 20.4 million passengers, a 1.9% increase on the prior year, driven largely by a recovery in international passenger numbers, which increased 4.2% on YTD Q2 2024.
• This international recovery was also highlighted in the latest Tourism Research Australia statistics (YE Jun 25), with Sydney recording 3.6 million overseas visitors (+4.6% y-o-y), staying 84.6 million nights (+3.2%) and generating an expenditure of $12.7 billion (+16.4%).

No new hotel openings in Q3, as the supply cycle moderates

• Despite no new openings in Q3, two hotels came online early in Q4 with the opening of 25hours Sydney (109 rooms) and the Caption by Hyatt (174 rooms). There are four hotels still under construction in Sydney’s CBD, set to add 1,016 new rooms or 4.3% to existing stock.
• Despite strong trading performance across the hotel sector, elevated financing costs and high land prices created significant headwinds for new hotel developments, affecting both standalone and mixed-use projects.

RevPAR growth across all market segments as strong trading performance continues

• Sydney’s hotel market sustained its strong momentum throughout the third quarter, boosted by major events such as the British and Irish Lions Tour, Sydney Marathon and NRL Grand Final. YTD occupancy continued to improve y-o-y, and ADR growth also picked up.
• Year-to-date transaction volumes in Sydney totalled $375.5 million, with volumes remaining well below long-term averages. This was due to limited opportunities being offered in the market and did not reflect investor sentiment.

Outlook: Sydney hotels are poised for sustained growth in 2026

• Demand is forecast to remain robust through the end of 2025 and into the new year, underpinned by a strong pipeline of major events and the ongoing recovery of international and corporate travel.
• Given the positive trading outlook and strong market fundamentals, investor interest in Sydney will remain high. Transaction volumes in 2026 are therefore expected to be largely dictated by the availability of quality assets brought to market.