Perth Hotel Development Trend Update

Tourism WA Infrastructure & Investment
Perth Hotel Performance &
Development Trend Update
December 2014
MACRO ECONOMIC INDICATORS
• Short term growth in Western Australia (WA) has tempered as a result of a shift in resource
related project life cycle and investment landscape.
• A weaker global growth picture, particularly among developing nations has also put downward
pressure on WA economic prospects. However, longer term macro economic outlook is still
positive with growth ahead of overall Australia.
• As a result of the fading of the mining boom WA’s ranking slipped for the first time since 2011 in
Commonwealth Securities Limited ‘State of the States’ report for Q3 2014; NSW is now the best
performing economy per the report.
• The critical role tourism plays in the State’s economy was recognised as Tourism WA received its
biggest budget ever for the current financial year.
The following key economic indicators have a
significant impact on the direction of the hospitality and
tourism market fundamentals in the short-to-mid-term.
•
Gross State Product (GSP): Western Australia’s
real GSP rose 5.5% in 2013-14, following 4.6%
growth in 2012-13, and was above annual average
growth of 4.9% over the past 10 years.
•
•
•
GSP is forecast to rise 2.75% in 2014-15 and 3.0%
in 2015-16.
Economic Growth
7.6%
8%
Australian Dollar: The recovery of the U.S.
economy, a decline in commodity prices and
the prospect of the Federal Reserve tapering
its quantitative easing program resulted in the
Australian dollar remaining below parity with
the U.S. dollar through the second half of
2013.
The Australian dollar exchange rate fell 11% to
US $0.915 cents in 2013-14 and is forecast by
the Western Australian Treasury to fall to US
$0.906 cents in 2014-15 and US $0.849 cents
in 2017-18. Throughout October, the
Australian Dollar was trading between US
$0.872 and $0.877.
6.2%
6%
5.5%
4.9%
4.7%
4.1%
4.3% 4.1%
5.0%
4.6%
•
Consumer Confidence: ANZ-Roy Morgan
Consumer Confidence rebounded 2.7%
to 114.6 in the week ending 26 October 2014
to be slightly above long-run average
levels (112.4). The improvement in confidence
was supported by stronger stock market
performance during this period and overall
reduced volatility in global financial markets.
•
Resources: A weakening short term growth
outlook for the Western Australian economy is
primarily driven by the move from mining
construction to production. The total value of
projects has continued to trend down, as
project completions have outpaced the new
developments coming online.
•
Mining new capital expenditure fell 1.5% to
$12 billion in the September quarter 2014 (not
adjusted for seasonal factors).
•
A 2014 report by Deloitte Access Economics,
Positioning for Prosperity identifies tourism as
one of five key future growth sectors in
Australia. In addition, in its report, ‘Compete to
Prosper:
Improving
Australia’s
global
competitiveness’ McKinsey & Company
Australia notes tourism as a growth potential
sector and an industry where Australia has a
global competitive advantage.
4.3%
4%
3.0%
3.1%
2.8%
2%
0%
2004-05
2007-08
2010-11
Western Australia GSP
2013-14
2016-17
Australia GDP
Note – Forecasts start in 2013-14.
Source: ABS 5220.0 State Accounts and 5204.0 National Accounts; Western Australia 2014-15 State Budget;
and Australia 2014-15 Commonwealth Budget.
•
Merchandise exports are expected to rise by an
annual average of 6% between 2014-15 and 201718, offsetting falling business investment over the
period.
•
Business investment in Western Australia fell 4% to
$16 billion in the June quarter of 2014.
•
Unemployment: The State’s unemployment rate
was 5.2% in October 2014; higher than the 5.0% in
the previous month and 4.2% a year earlier.
Australia’s unemployment rate was 6.2% in
October 2014.
•
Population: Population growth is forecast to slow
from 3.5% in 2012-13, to 2.6% in 2013-14 and
2.1% in each year to 2017-18, according to the
2014-15 State Budget.
Sources: Reserve Bank of Australia, Australia Bureau of Statistics, Government of Western Australia, Department of State Development, Deloitte Access
Economics, McKinsey & Company, ANZ-Roy Morgan Consumer Confidence Index, WA Treasury Corporation, http://www.tradingeconomics.com/australia/currency
Page 1 of 9
TOURISM AND VISITOR TRENDS
• Domestic arrivals of approximately 454,495 through Perth Airport in October 2014 was (+) 1.38%
higher than October 2013; Year to Date (YTD) October 2014 domestic arrivals were also fairly
consistent with arrival levels during the same period in 2013.
• Perth Airport foreign national arrivals increased by (+) 7.31% YTD October 2014 in comparison to
the YTD October 2013 period.
• Top markets in YTD October 2014 remained consistent with the same period during the previous
year with majority of visitors coming from the UK, New Zealand, Malaysia, Singapore, China, India,
Indonesia and Ireland.
International Airport Arrivals
2010 - YTD October 2014
Perth Domestic Airport Arrivals
2010 - YTD October 2014
4,860,370 4,927,440
5,000,000
939,155
950,000
856,787
4,500,000
4,000,000
850,000
4,290,385
3,909,734
650,000
3,000,000
550,000
2,500,000
450,000
2,000,000
350,000
1,500,000
250,000
1,000,000
150,000
758,375
734,077
750,000
3,500,000
813,787
775,133
4,112,507 4,104,830
50,000
500,000
2010
2011
2012
2013
YTD
Oct
2013
2010
YTD
Oct
2014
2011
2012
2013
YTD
Oct
2013
YTD
Oct
2014
International Arrivals Origin October 2014
Germany
3%
Ireland
4%
South Africa USA
2%
2%
• In October 2014, passenger volume from
Singapore increased by over (+) 30%,
China by over (+) 25%, Malaysia by over
(+) 26% and South Korea by over (+)
13% relative to October 2013 levels.
UK
19%
India
4% Indonesia
5%
China
5%
Singapore
8%
Malaysia
11%
New Zealand
12%
• Notable decreases in passenger volume
were experienced in October 2014
compared to October 2013 from Thailand
at
(-)
22%,
Taiwan
at
(-) 11%, and UK at (-) 4%.
Other
25%
Sources: Department of Immigration and Border Protection (DIBP), Perth Airport Pty Ltd
Notes: International arrivals include Australian residents on international passports.
‘Other’ category includes Germany, France, Japan, South Korea, Thailand, Taiwan, Hong Kong, Italy, Canada, Vietnam, Mauritius, Brunei and UAE
Additional information can be found on Tourism WA’s WA Tourism Industry Scorecard:
http://www.tourism.wa.gov.au/Research-Reports/Latest_Visitor_Facts_and_Figures/Pages/Monthly-Tourism-Indicators.aspx
Page 2 of 9
TOURISM AND VISITOR TRENDS
• Driven largely by interstate and intrastate visitors, in the Year ending (YE) September 2014, there
were 8.1 million overnight visitors to WA who spent $6.7 million and stayed 62.2 million nights. The
average length of stay for overnight visitors during this period was 7.7 nights.
• International visitation in WA grew to 807,000 for the YE September 2014, an increase of (+) 7.5%
relative to YE September 2013 visitation. Growth in international visitation to WA was driven by the
Visiting Friends and Relatives (VFR) market (+13.9%) and the holiday/leisure market (+9.1%).
• Despite the growth in international visitors to WA, international visitor expenditure in WA for YE
September 2014 increased only slightly from YE September 2013 by (+) 5.1%, while nationally
international visitor expenditure grew by (+) 9% over the same time period.
Overnight International Visitors to Western Australia (+) 7.5%
•
807,000 overnight international visitors to WA.
•
International visitors to WA represent 12.9% of visitors in Australia
Overnight International Visitors Spend in Western Australia (+) 5.1%
•
$2,313 million in spend
•
$2,866 average spend per visitor
•
12.1% of international spend in Australia
Sources: Tourism Western Australia, Tourism Research Australia
Page 3 of 9
PERTH HOTEL PERFORMANCE – HISTORICAL AND CURRENT
• As a result of continued softening of overall macro economic fundamentals, RevPAR decreased
(-) 3.91% from $187.97 in YTD October 2013 to $180.61 in YTD October 2014.
• At 85.9% in YTD October 2014, Perth CBD occupancy remained fairly consistent with levels
achieved during the same period a year ago. ADR levels decreased (-) 4.93% from $221.09 in YTD
October 2013 to $210.20 in YTD October 2014.
Perth CBD Hotel Performance
2003 - YTD October 2014
$240
90%
$220
88%
86%
$200
84%
$180
82%
$160
80%
$140
78%
$120
76%
$100
74%
$80
72%
70%
$60
2003
2004
2005
2006
2007
ADR
Year
2008
2009
2010
RevPAR
2011
2012
2013
YTD
Oct
2013
YTD
Oct
2014
Occupancy
Occupancy
% change
ADR
% change
RevPAR
% change
$90.91
$92.62
$102.59
$119.06
$137.31
$156.53
$149.34
$156.60
$177.56
$197.98
$188.31
-0.4%
3.5%
3.7%
2.7%
-2.3%
-3.1%
3.5%
2.4%
2.1%
-1.2%
2.3%
7.0%
12.0%
12.3%
16.6%
-1.6%
1.4%
10.7%
9.2%
-3.7%
1.9%
10.8%
16.1%
15.3%
14.0%
-4.6%
4.9%
13.4%
11.5%
-4.9%
$187.97
$180.61
1.07%
-4.93%
-3.91%
Occupancy
ADR
RevPAR
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
76.6%
76.3%
79.0%
81.9%
84.1%
82.2%
79.7%
82.4%
84.4%
86.2%
85.2%
$118.64
$121.40
$129.89
$145.42
$163.31
$190.50
$187.49
$190.02
$210.38
$229.69
$221.10
YTD October 2013
YTD October 2014
85.0%
85.9%
$221.09
$210.20
Note: “% change” results indicate the percentage change (growth or decline) from the previous year, or in the case of the YTD
figures, the percentage change from the previous YTD figure (i.e. the same time period of the year prior).
Statistics include data from approximately 21 hotels in the Perth CBD.
Source: Smith Travel Research
Page 4 of 9
PERTH HOTEL PERFORMANCE – HISTORICAL AND CURRENT (Continued)
• Despite recent decreases in RevPAR through YTD October 2014, Perth still achieves one of the
highest RevPAR levels in Asia Pacific and Australia at US$153.43.
• In YTD October 2014 the overall Perth market achieved the highest RevPAR levels of all capital
cities in Australia and the third highest RevPAR in the Asia Pacific region.
Australia Capital City RevPAR Performance
2009 - YTD October 2014
$200
$190
$180
$170
$160
$150
$140
$130
$120
$110
$100
2009
2010
Perth
(US$)
2011
Melbourne
2012
Sydney
2013
Brisbane
YTD Oct
2013
Australia
Asia Pacific Hotel RevPAR Performance YTD October2014
$210
$190
$170
$150
$130
$110
$90
$70
$50
Note: Statistics for Perth include data from approximately 46 hotels in the Perth CBD and surrounding cities.
Source: Smith Travel Research
Page 5 of 9
YTD Oct
2014
PERTH HOTEL PERFORMANCE – OUTLOOK
• Lodging performance outlook remains positive with RevPAR growth estimated by various
analysts to increase between 2.5% and 4.2% in 2014 and 2.6% and 7.4% in 2015.
• Despite analysts outlook on RevPAR growth for 2014, a decrease in RevPAR in the Perth
CBD of just over 3% during the twelve months ending October 2014 relative to the prior year
suggests that estimates may not be achieved.
• Decrease in occupancy is expected in the medium term as new supply additions through
2018 are absorbed into the market.
•
Lodging fundamentals are expected to ease
from historical highs in 2012 as a result of
softening resource related corporate demand.
Approximately 44% of all nights in paid
accommodation are accounted for by corporate
travelers, with much of this travel being
resources-related.
•
Perth continues to grow as a leisure tourism
destination and significant investment in
infrastructure projects will contribute to the city’s
appeal. Combined worth of an estimated $9
billion will be invested in projects such as City
Square, Raine Square, Riverside, Perth City
Link, Perth Arena, and the Elizabeth Quay
development.
•
Strong growth in visitor arrivals from Asia’s
emerging economies is expected to support
demand fundamentals going forward.
•
The main driver of the occupancy easing is
supply additions expected between 2015 and
2018.
•
•
Residual strength of the mining sector
coupled with diversification and growing
demand from the leisure segment will
continue to support room rate growth.
However, through 2014 decreasing demand
from resources investment activity has led
to tempering of room rates, despite
resilience in occupancy levels.
•
RevPAR is estimated by various analysts
(Jones Lang LaSalle, Dransfield, Deloitte,
Colliers) to increase between 2.5% and
4.2% in 2014 and 2.6% and 7.4% in 2015;
however,
RevPAR
decrease
of
approximately 3.2% in the twelve months
through October 2014 suggest that
estimated growth levels for 2014 may not
be achieved. RevPAR decreases through
October 2014 have primarily been a result
of decreases in ADR.
•
RevPAR is expected to be weighed down
by occupancy easing in 2016 through 2018
as new supply enters the market.
•
Tourism WA will continue to monitor hotel
performance in the Perth market relative to
analyst forecasts on a real time basis.
The following chart represents Dransfield’s estimated performance for the Perth hotel market:
Perth Hotel Performance
2014F - 2022F
$280
90%
$260
$240
$220
85%
80%
$200
$180
$160
$140
75%
$120
$100
$80
60%
70%
65%
55%
$60
50%
2014F
2015F
2016F
ADR
2017F
2018F
RevPAR
Source: Dransfield Hotel Futures February 2014
Note: F = Forecast
Page 6 of 9
2019F
2020F
Occupancy
2021F
2022F
PERTH HOTEL DEVELOPMENT PIPELINE
• Tourism WA’s goal of increasing Perth CBD’s supply by 1,900 additional short stay
accommodation rooms by 2020 is anticipated to be achieved through partnerships with MRA,
LandCorp and through private investment.
•
There are a myriad of factors that ultimately
determine whether a hotel development
progresses. Consequently, the estimated
hotel pipeline is constantly moving as
various projects are cancelled, stalled or
progress.
•
The release of the Plot Ratio Bonus by the
City of Perth in February 2013 has
increased the number of Development
Approvals (DA) being sought by hotel
developers – although the conversion rate
to building licences has yet to increase.
•
•
•
Despite positioning in the top end of the
pipeline, the incoming supply is varied with
a wide range of types of hotels (i.e. luxury,
boutique, casino hotels) brands, hotel
management
companies,
including
independently
managed
hotels,
are
represented in the pipeline.
2020 Target: 1,900 Rooms
Additional
Rooms Needed,
117
Hotel market dynamics and supply and
demand fundamentals will ultimately dictate
the level of investment and development
activity in the mid to long term.
Recently Added,
276
Crown Towers,
500
There are a number of DAs pending across
all hotel segments. However, the majority of
the committed pipeline supply rooms are in
the top end of pipeline (luxury segment)
indicating the need for additional rooms in
the lower end of the segments in order to
ensure that all types of demand are
provided for.
Under
Construction,
441
Committed, 566
Perth CBD Hotel Pipeline (Number of Committed Rooms)
2011 - 2020F
8,800
8,600
8,400
8,200
8,000
7,800
7,600
7,400
7,200
7,000
6,800
6,600
6,400
6,200
6,000
5,800
5,600
566
72
130
500
46
25
236
145
48
8,657
15
6,874
2011
2012
2013
Total Hotel Supply
2014
Five Star
2015
2016
Crown Towers
2017
Four Star
2018
2019
2020
Three Star
Notes: Star category is often self-rated. When analysing the pipeline segmentation target Tourism WA analysis may rate various projects differently.
Both traditional hotels and apartments hotels are included in figures.
Perth CBD also includes East, West Perth, Northbridge and Burswood.
F = Forecast
Source: Various government agencies, industry developers, investors, operators and other stakeholders and market participants.
Page 7 of 9
PERTH HOTEL DEVELOPMENT PIPELINE (CONTINUED)
• Currently eight projects and 1,507 rooms are committed to enter the Perth CBD market between
2015 and 2018, including the Crown Towers in Burswood. Many of the projects considered
committed are government-supported projects.
Expected Opening Total Number
Date
of Rooms
Project Name
Status
Terrace Hotel (Best Western Premier)
Completed (2012)
15
Fraser Suites
Completed (2012)
236
Bailey’s Serviced Apartments
Completed (2014)
25
Completed
276
City Lights - Best Western (Newcastle Street) Under Construction
2015
46
Treasury Precinct Hotel
Under Construction
2015
48
Quest (Mounts Bay Road)
Under Construction
2015
71
Alex Hotel Northbridge
Under Construction
2015
74
Quest (Kings Park Road)
Under Construction
2016
72
Quest (Adelaide Terrace)
Under Construction
2017
130
Westin (FESA House)
Committed/Planning –
Government
2018
362
Ritz-Carlton (Elizabeth Quay)
Committed/Planning Government
2018
204
Crown Towers
Under Construction
2016
500
1,007
Committed
500 (Crown)
Total
1,507
Remaining Potential Government (MRA) hotel
Sites
Perth City Link
Early Planning
2018
~200
Waterbank/Riverside
Early Planning
TBD
~200
• Hotel developments are considered committed if
they are under construction or if government is
actively involved in the project.
• Serviced apartments are included in the pipeline.
• Crown Towers is included in the analysis due to
its proximity to the CBD and its market positioning
that includes high end and corporate visitors.
However, it is reported separately given its
location in Burswood and its gaming/casino focus.
Page 8 of 9
PERTH HOTEL DEVELOPMENT PIPELINE (CONTINUED)
• In addition to the hotels in the development pipeline considered ‘committed’ there are a number
of hotels that are in various stages of planning and either have a development application
pending or already approved; however, they have not yet commenced construction or have been
granted building licences. Many of these hotels have also signed management and/or franchise
agreements.
Recently Announced Hotels
Some recently announced hotels in the early planning phase of the pipeline include the following:
• The MRA developments at City Link and Waterbank both contain hotels in the master plans. Short term
accommodation at these locations would likely be positioned below the 5 star category and would
contribute between 300 and 400 additional rooms to the supply pipeline. Once locked in through the land
sale process, these hotel developments would be considered committed, although they won’t be
delivered to the market until 2018 or later. Lots 2 and 3A of the City Link were released by MRA through
Jones Lang LaSalle on 11 June 2014 for a hotel and mixed-use development via an Expression of
Interest (EOI). Proposals are currently being assessed.
• Silverneedle Hospitality announced its second Sage-branded hotel in Australia would be a 101 room
hotel located in West Perth and is estimated to open in 2016.
• In early 2014 Hilton announced that they signed a management agreement with SKS Group to manage
two hotels under the DoubleTree brand, located in Perth (at the Barrack Street Jetty site) and Fremantle.
A third location was announced in October for the DoubleTree in Northbridge, to be located at 100
James Street – the development application for this project was approved in October 2014.
• It has been announced that Rehawk Property Group had signed a management agreement with Accor
for an Ibis Styles branded hotel to be located at 69 Adelaide Terrace.
• A new build 120 room Mantra-branded hotel was also announced earlier this year to be located in the
King Square precinct; building licences have not yet been issued for either of these developments.
• On 2 July 2014, Quest announced that they will double their supply of hotel rooms in Perth. In addition to
the three aforementioned sites under construction, there is a fourth under construction in Rockingham.
Another site in Fremantle is also planned and awaiting a Building Licence.
• A development application for a 250 room hotel to be located at 190 Adelaide Terrace was also
approved in October 2014.
Recently Announced Renovations or Rebranding
There have been a number of significant hotel renovations recently announced. Notable announcements
include the following:
• Holiday Inn Perth City Centre is set to undergo a $12 million dollar refurbishment with works
commencing at the hotel in early January 2015. The project, which will be completed by the end of 2015,
includes a complete update of the guest rooms, public areas and food and beverage outlets.
• IHG has signed a management agreement with 240-room Rydges Hotel on Hay Street, Perth, owner
UNIR Hotels to rebrand the hotel to an InterContinental hotel. The hotel will close in the third quarter of
2015 and will be renovated to InterContinental brand specifications. With an opening scheduled for mid2016, the new hotel will open its doors ahead of a number of other planned luxury hotels in the Perth
CBD such as the Ritz Carlton at Elizabeth Quay and the Westin Hotel at the old FESA House site on
Murray Street.
Page 9 of 9