Cost pressure on new builds as Asia-Pacific region’s hotels pipeline shrinks
Despite recent glamour openings in Sydney and Melbourne, the number of hotels planned for construction in the Asia Pacific region has dropped 30 per cent on last year.
Despite the recent opening of the luxurious Capella Sydney and Ritz-Carlton Melbourne, the number of hotels planned for construction in the Asia-Pacific has fallen 30 per cent on last year.
Figures from STR also reveal the total number of hotels under construction in the Asia-Pacific is down 4.4 per cent on March last year to a total of 905,000 rooms, led by China with almost 300,000 rooms being built.
In Australia, there is a pipeline of 40,436 rooms on the horizon, made up of 11,842 rooms under construction, a further 19,269 in planning, and 9325 in final planning, according to STR research obtained exclusively by The Australian. This is slightly ahead of Vietnam, which has just over 36,358 rooms in the pipeline.
But agents such as CBRE national director Wayne Bunz questions whether the nearly 30,000 hotels in planning stages in Australia will actually begin given excessively high building costs.
“I don’t know how construction costs would make it work unless there’s a great change in prices coming down,” said Mr Bunz.
Mr Bunz said there was an oversupply of hotels in Melbourne and Perth was still absorbing the number of newly built hotels.
JLL head of investment sales Peter Harper said that, before the pandemic, most of Australia’s capital cities had hotel room occupancy rates that were among the highest in the world, at 80 per cent plus.
“Since this time we’ve seen considerable increases in new supply, much of which has been skewed towards the upper-upscale and luxury end of the chain-scale, and this product has had a significant positive impact on rate ceilings,” Mr Harper said.
“While most markets have now achieved a full RevPAR recovery, this has been largely average daily room rate driven, with a full occupancy recovery still to play out. The question of whether Australia needs more hotels can probably only truly be answered at this time.”
However, if the past two years has taught us anything it is that quality new hotels strongly appeal to leisure and corporate travellers, with many achieving better KPIs than existing assets during the recovery.
Meanwhile, STR said while each of the four world regions revealed a year-on-year drop in hotel construction, the Asia-Pacific pipeline came closest to its 2022 comparable.
In Europe the total number of hotels in construction or planning was down 13.7 per cent at 474,526 rooms, with Germany (where 34,030 hotel rooms were under construction) and the UK (29,160 hotel rooms under construction), the countries with most building activity.
In the Middle East, Saudi Arabia has 42,033 hotel rooms under construction while the United Arab Emirates has 22,324. But construction is still nearly 6 per cent down on a year ago. In the Americas there are 197,844 hotel rooms under construction, down 4.5 per cent on a year ago.
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