February 15, 2016 – Sydney's CBD and metropolitan hotel markets finished 2015 on a high with full year STR data reporting exceptional occupancies and average daily rate (ADR) levels across the board.
Conducive to the respective markets' strong performance remains relatively benign supply pipelines, increases in major demand generators, growing airline capacity, and continued international and domestic visitation growth driven by the depreciation of the Australian dollar.
In Sydney city, hotel occupancy increased marginally on existing highs to 88.2% for the full year, while ADR increased by 6.6% to $243. The five-star market followed similar growth trends with occupancy at 88.6% and ADR now nearing $300.
Craig Collins, Chief Executive Officer – Australasia, JLL Hotels & Hospitality Group, said, "Sydney hotels are having a golden run and this should absolutely continue. Hotels in Sydney are trading exceptionally well and Sydney is one of the most sought after tourism investment markets across Asia Pacific."
Mr Collins continued, "Many global hotel buyers want a Sydney hotel in their portfolio. The fundamentals are strong and the future is bright. Hotel investors love Sydney's new infrastructure, the limited hotel supply, the cranes on the skyline and the positive feel of the city. When global hotel investor's talk about where they wish to invest, Sydney now sits alongside London, Paris and New York, it truly has become a global city."
Sydney's metropolitan markets also performed exceptionally well in their own right with Ryde, the Airport Precinct and Parramatta all recording strong RevPAR gains.
A function of reduced supply, Ryde had the largest ADR gain out of the three markets at 13.5% to finish the year at $171 with an occupancy of 78.5%. The Parramatta market recorded a 5% increase in ADR to $170 as it benefitted from a strong and stable occupancy base of around 83%. The Airport Precinct, albeit with a modest increase in ADR of all the Sydney markets at 4.3% ($159), achieved one of the highest occupancy rates in the country of 87.8%, recognition of the fact that this market not only draws on demand from the airport, but also the significant economic activity within the surrounding commercial, residential, industrial and logistics hubs.
Peter Harper, Senior Vice President, JLL Hotels & Hospitality Group, said, "The substantial growth seen over 2015 in Sydney's metropolitan markets, whilst contributed to by CBD overflow, is a product of increasing demand for quality hotel accommodation in these areas."
Mr Harper continued, "We expect to see continued growth in these markets with further densification and investment acting as a catalyst for sustained demand into the future."
The hotel trading outlook for 2016 is positive with these markets expected to continue to benefit from the current demand versus supply equation with any new hotels coming online likely to be absorbed by pent up and growing demand.
From an investment perspective, sales activity across the various markets is anticipated to be constrained throughout 2016 following several years of heightened deal volumes.
"Investor demand remains at an all-time high yet the level of available stock is probably at a decade low at the moment. There's no doubt that investment market conditions remain in favour of hotel owners." concluded Mr Collins.
Year to Date – December 2015 vs December 2014 Occupancy % Average Daily Rate ($) RevPAR ($) 2015 % Change from YTD 2014 2015 % Change from YTD 2014 2015 % Change from YTD 2014 Sydney+ 88.2 1.3 243 6.6 214 7.9 Sydney 5+ 88.6 2.0 292 6.3 258 8.4 Sydney Airport+ 87.8 5.7 159 4.3 140 10.3 Ryde+ 78.5 2.3 171 13.5 134 16.0 Parramatta+ 83.1 0.3 170 5.0 141 5.2
Source: STR Global, JLL
