Melbourne adds 1,311 new hotel rooms to its supply in H1

Over 2,000 rooms were added to the inventory in 2021.

Melbourne has witnessed a robust increase in hotel room supply over the past year. According to a JLL report, 2,047 rooms entered the market over 2021, taking the average total inventory to 22,401. 

Additionally, in the first half of 2022 five projects have completed adding a further 1,311 rooms. JLL is also tracking nine properties currently under construction in Melbourne City, which once complete will result in a net increase of 2,505 rooms or 11.2% of existing stock.

Here’s more from JLL:

The Melbourne hotel sector continues to show early signs of recovery out of COVID-19, with rising ADR’s and steadily rebounding occupancy rates. Interstate leisure demand is currently leading the recovery, with the market peaking during major events such as the Australian Open and Formula One Grand Prix. This is expected to be followed by a return in corporate/MICE travel, which is already showing positive signs of recovery. 

As at YTD May 2022, Melbourne City’s average daily rate (ADR) and occupancy were AUD 222 and 53.6% respectively. ADR increased 34% from the same period in 2021, as average occupancy increased 19%. Despite this initial recovery, occupancy remains 36% down on pre-COVID levels (YTD May 2019). Resultantly, revenue per available room (RevPAR) was AUD 119 at YTD May 2022, representing a 59% increase from prior year, however still a 30% decline on YTD May 2019.

Outlook

Visitor arrivals are expected to continue slowly recovering over 2022 with the recent reopening of international borders on 21 February 2022 to appropriately vaccinated visa holders. We expect demand and trading conditions to continue a progressive recovery over the short to medium term as the market continues to normalise. 

However, Melbourne’s hotel supply pipeline is anticipated to impact the market, placing downward pressure on occupancy rates, moderating trading performance and somewhat extending the anticipated recovery period compared to other national markets. However, over the long-term, returning demand is expected to help absorb this supply and stabilise the market.