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Sydney hotel supply to increase by 5.1%
Six new hotels are slated to add 1,173 new rooms to the market.
According to a JLL report, a total of 816 hotel rooms opened in Sydney over 2023, which represented a 3.5% increase in total room stock. The most recent opening in Sydney City was the 586-room, W Sydney, which opened in October and is the world’s largest W Hotel.
“Six new hotels are currently under construction in Sydney CBD and surrounding fringe suburbs, representing a net increase of 1,173 rooms or 5.1% on existing stock. Only one of these is anticipated to enter the market over 2024, with the TFE operated hotel, The Eve Surry Hills Village (102 rooms) set to open in September,” the report said.
Here’s more from JLL:
The annual events calendar in Sydney is expanding and plays a vital role in supporting the city’s hotel and tourism industry. Events such as Vivid Sydney, Taylor Swift concerts and SXSW resulted in strong room night leisure demand and recent peaks in market-wide occupancy. There is also an observable increase in corporate and MICE demand, as well as international visitor arrivals.
Market occupancy as at YTD March 2024 improved to 81.4% y-o-y, versus 76.8% for the same period last year. Despite this ongoing recovery, occupancy continues to sit below pre-pandemic levels, illustrated by a pre-COVID-19 occupancy rate of 88.1% for the same period in 2019.
RevPAR strong, driven by growth in ADR and uplift in occupancy
As at YTD March 2024, revenue per available room (RevPAR) increased to sit at AUD 285, representing a 15.6% increase from the prior year, and has now recovered to sit 20.2% above pre-COVID-19 levels (YTD March 2019). This recovery has been driven by a continued growth in average daily rates (ADRs) (+9.1% y-o-y) and a steady uplift in market occupancy (+6.0% y-o-y).
Transaction volumes in Sydney reached in excess of AUD 640 million in CBD and fringe suburbs over 2023. Investment momentum continued over the first quarter of 2024, with notable transactions including the settlement of the Courtyard by Marriott North Ryde (AUD 55.2 million), and announced sales of the InterContinental Double Bay (AUD215 million) and the Woolstore 1888 by Ovolo (AUD 55 million).
Outlook: Sydney well poised for continued growth in 2024
Sydney’s ongoing market recovery and outlook remains positive, with a pickup in corporate and MICE demand, as well as a continued resurgence of international and Chinese visitor arrivals. Occupancies also continue to increase in Sydney, and the extraordinary growth in ADR is easing.
In spite of challenging economic conditions and increases in borrowing costs, there remains strong investor interest for Sydney hotels. Given the tightly held nature of the market and being driven by strong fundamentals, capital continues to target assets viewed as either aspirational, be that trophy or strategic, and assets with value-add potential.
Note: Sydney Hotels refers to all grades of accommodation and includes both hotels and serviced apartments.