By Cara Waters
Melbourne’s luxury hotel market is booming as the sector works to cater better for families and insists people are turning away from Airbnbs.
Located opposite Parliament Gardens, Lanson Place is the latest luxury hotel to open its doors, marking the 22nd hotel to open in the CBD and surrounds since January 2020.
Lanson Place general manager Marcus Packham celebrates the hotel’s opening with staff.
Demand for hotel rooms in the city is continuing to grow and could suggest a shift back to formal accommodation as the government prepares to introduce its 7.5 per cent short-stay levy.
The $80 million “luxury boutique” hotel at 502 Albert Street is in a historic building that housed the Salvation Army’s former printing press.
The hotel has tried to appeal to families or people who would ordinarily stay in an Airbnb for the amenities: of the hotel’s 137 rooms, many are interconnecting and 57 are apartments with kitchen and laundry facilities.
“It’s the concept of a home away from home,” general manager Marcus Packham said.
He said there was still room for new hotels in Melbourne, despite the opening in the past year of the Ritz Carlton, Le Meridien and The Standard X.
“There’s enough special events to hold it up, but you have to have a good quality product,” he said. “There’s the grand final, horse racing, then the Boxing Day Test. January is tennis, Chinese new year in February, corporates come back, then the grand prix in March.”
A spokeswoman for Marriott Bonvoy, which operates the Ritz Carlton and Le Meridien, said the hotels had buoyant demand for footy finals weekends.
“The spring racing period is also showing strong demand,” she said.
Hot on the heels of Lanson Place is 191-room luxury hotel Melbourne Place, set to open in November on Russell Street.
General manager Tracey Atherton said there was room in the market for another hotel, and Melbourne Place was focused on design and its food and drink offering.
“Being an independent hotel will differentiate us, so we are not attached to a brand. It’s quite rare for Melbourne,” she said. “Where we are located, there is definitely appetite for a new hotel.”
Peter Harper, head of investment sales for hotels and hospitality at real estate firm JLL, said eight new hotels were being built, and 22 new hotels had opened since January 2020 – a 33 per cent increase in total hotel supply in Melbourne.
“The dark cloud of COVID essentially reset the market,” he said. “When Melbourne came back online, so to speak, a lot of the new product was weighted towards upscale and luxury assets that really drove the rate ceiling up and enabled the whole market to come up.”
An artist’s rendering of the rooftop of Melbourne Place, a 191-room luxury hotel which is set to open in November.
Harper said that in 2019, Melbourne had a hotel occupancy rate of about 83 per cent and an average daily rate of $194. Now, the market is sitting at a lower occupancy rate of 73 per cent – “which is incredible given how many new hotels have come online” – and an average daily rate of $240.
“I don’t think Airbnb is anywhere near as much of a challenger and competitor to the Melbourne hotel market as it was several years ago,” he said.
Atherton said that after the pandemic, many Airbnbs had returned to long-term tenants.
“I think that we crave a high level of service as well,” she said. “There’s definitely a client that still wants Airbnb, probably more family-focused, and they might want a few rooms in an apartment, but for that five-star brand destination, Airbnb can’t compete with that any more.”
Victorian Tourism Industry Council chief executive Felicia Mariani said properties which were previously short-stay accommodation in Melbourne were going on the market.
“People are stepping out, not just because of the impending short-stay levy, but already just because of the additional taxes on investment properties,” she said.
Mariani said while there was no data available on short-stay accommodation, anecdotally there had been a shift.
“Post-COVID, I think the hotels did a really, really good job of capitalising on the improbability of travel,” she said. “There was all these uncertainties about travel, and hotels did a great job of saying, you could cancel up to 24 hours before your stay.”
Mariani said in comparison, the short-stay companies were often inflexible.
Country manager at Airbnb Australia and New Zealand, Susan Wheeldon, would not provide any booking data for Airbnb in Melbourne but said globally, Airbnb had added nearly 1.2 million active listings over the past year.
“Airbnb remains popular among visitors to Melbourne and Victoria, providing flexible options for families and group travellers, especially during big events,” she said.
The Morning Edition newsletter is our guide to the day’s most important and interesting stories, analysis and insights. Sign up here.