Revenue rout for southern hotels with coronavirus lockdown

Revenues per available Melbourne hotel room were just $40.52 in June, with occupancies dropping 53.4 per cent.

The Vibe hotel in Melbourne, located on the corner of Queen and Flinders Street.

In the lead-up to the latest COVID-19 lockdown Melbourne hoteliers lost more than 67 per cent of their revenues per room during June, compared with a year earlier, data house STR reports.

Revenues per available Melbourne hotel room were just $40.52 in June, with occupancies dropping 53.4 per cent from a year earlier to average just 34 per cent. Average daily room rates dropped nearly 30 per cent to $119 a night.

But JLL Hotels managing director and head of investment sales for Australasia, Peter Harper, said there was still more accommodation being built in Melbourne than in any other Australian capital city.

“Melbourne still has the biggest pipeline in terms of the number of hotels under construction and in the CBD and fringe suburbs, with some 22 under construction,” Mr Harper said.

“The one thing that does protect so many of the hotels that are under construction is that the owners were not forecasting to get a great deal of revenue for the next couple of years ... as these projects looked to establish themselves in the market.

“It is the existing hotels that will feel the largest impact on profitability.”

The hotels under construction range from three to five stars, but the pipeline for the 10 or so hotels that were mooted and had not advanced to construction stage has completely dried up.

Different uses, or sell

The developers of these hotels, a mix of offshore and domestic companies, will be forced to put the sites to different uses or sell them.

“Most of these hotels that have not yet reached the construction stage are no longer feasible to proceed with,” Mr Harper said.

On a more positive note he said that when Melbourne recovered it would sport an incredible range of new product offering.

“And the new supply coming on stream will force existing owners to refurbish in order to remain competitive,” he said.

He said there were no hotels on the market in Melbourne, with vendors waiting out the pandemic.

Mr Harper had, however, just sold the newly developed Vibe Hotel, on the corner of Queen and Flinders streets, for a rumoured $108m. The buyer is reported to be Sino Pacific Trading out of Thailand.

Opened in May, the Vibe Hotel Melbourne has 206 guests rooms on a 737sq m site and sports views over the Yarra River.

It was developed by Caydon.

Settlement of the sale is expected later this year.

Mr Harper said it was the first sale of a major operating Melbourne CBD hotel in years.