Why the Australian hotel sector has a promising future ahead

Its proximity to the rising wealth in Asian markets will drive tourism growth.

While the Australian hotel sector has rebounded strongly from the pandemic, Savills said in a report that the recovery in tourism has further to run, with short-term international visitor arrivals not expected to exceed pre-pandemic levels until next year. 

“Furthermore, the long-term outlook remains promising. Australia’s geographic proximity to large and growing Asian markets, with rapidly rising household incomes, will drive growth in tourism activity over the medium-to-long term. Strong population growth over the next few years will also boost domestic tourism activity,” the analyst added.

Here’s more from Savills:

In response to ongoing cost of living pressures, consumers typically reduce discretionary spending. However, in this cycle, there is evidence that consumers are treating travel, holidays, and hotel stays as high priority in their spending. 

Relatively tight labour market conditions mean that wage growth is expected to exceed inflation as price growth moderates over the next year or so. Positive real wage growth will ease the pressure on households. Furthermore, the Stage 3 tax cuts, taking effect from July 2024, and potential interest rate cuts next year, will boost household disposable income and could lead to a pickup in discretionary consumer spending, with potential positive flow-on effects for the hospitality sector.