Unlocking Growth in Australia & New Zealand

Analysis by Matthew Burke

Australia’s hotel performance has stabilized, with positive expectations for the remainder of 2024. In contrast, New Zealand's tourism industry faces a stalled recovery.

International arrivals to Australia are improving as air travel access increases and domestic overnight trips rebound. Regional occupancy has returned to historic norms, with average daily rate (ADR) maintaining growth over the past few years. Demand in Australian capital cities now exceed 2019 levels for all cities except Darwin. August year to date, demand growth in all regions outpaced supply, leading to higher occupancy.

Meanwhile, New Zealand's tourism industry is grappling with a more challenging outlook. August RevPAR year to date is down 3.8%, mainly due to increased supply (+2.7%) and softer demand (+1.4%). The winter season has been particularly tough, with August RevPAR down 17% year over year. However, this comparison is skewed by the boost from the 2023 FIFA Women’s World Cup, which supported last year's numbers.

In Australia, midweek occupancy growth is primarily driven by corporate travel, group meetings, and flexible international travel patterns. Weekend occupancy has softened slightly through winter but remains close to historic long-term averages. ADR across the country has seen minimal change compared to the previous year, with demand consistently outpacing supply across all segments.

The future of room rate growth in Australia is closely tied to market activity. As markets become busier, ADR naturally rises. For instance, in 2019, Sydney had 49 nights with occupancy exceeding 90%. In 2024, Sydney has already recorded 25 such nights year to date. This difference significantly impacts ADR, with a night at 90%+ occupancy potentially adding up to $109 more compared to a night with less than 70% occupancy.

Australia’s supply pipeline includes 90 projects currently under construction. These projects are long-term commitments, although the number of planned developments has decreased compared to last year's pipeline. Nonetheless, more proposals are emerging, balancing strong market performance with high construction costs.

In New Zealand, while supply growth is expected to moderate over time, the immediate challenge is generating additional demand.

Looking ahead, occupancy on the books for the major Australian cities over the next 90 days is promising, ranging from on par with last year, to up to 11% higher. The fourth quarter is expected to perform at or above 2023 levels, continuing the trend of rising occupancy and ADR seen in the first half of the year.

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