The number of hotel rooms under construction or proposed has increased by 40% since March 2007, according to a new report from Jones Lang LaSalle Hotels ’. The Jones Lang LaSalle Hotels’ recent National Hotel Development Register revealed a significant uplift in the number of proposed projects in Australia’s major markets. This boosted the number of hotel rooms in development to 6,000. New room supply will increase existing stock on average by 2.6% per annum during the period to 2010.
While the viability of new development remains a challenge, the continued demand for hotel accommodation and the positive outlook for future hotel trading performance resulted in an increased level of hotel and serviced apartment development projects. As at the end of November 2007, there were 2,031 rooms under construction in Australia’s ten major markets. This represented little change from their last survey in March 2007 with rooms under construction having increased by 8.7% or only 163 rooms.
However the number of likely proposed rooms (mooted in all markets) has increased by around 70% (1,665 rooms) and was at the highest level since they started the National Hotel Development Register in 2003. Melbourne is the busiest market in terms of hotel development with 626 rooms currently under construction with much of the activity thanks to the major new project from Crown. With Melbourne’s long term success in generating demand growth, it has been the market with the most focus for new hotels. The proposed new hotel at Crown Casino accounted for almost half of this proposed room stock for Melbourne. Darwin’s hotel market is expected to be the most significantly impacted with rooms under construction increasing existing stock by 17.4%.
The new convention centre and strong growth fundamentals are however likely to underpin the local market. There are currently no new rooms under construction in Adelaide, Brisbane, Cairns, Canberra and Hobart however this is expected to change with an increase in proposed projects over the medium term. Adelaide will be impacted with 421 rooms or a 10.4% increase on existing stock if all proposed hotel developments progress. Developers were confident that Adelaide would experience significant growth in accommodation demand as South Australia becomes the next beneficiary of the resources boom. The outlook for Sydney’s hotel investment market is bright with only marginal increases to the city’s room supply up to 2010. Coupled with the positive inbound forecasts this bodes well for potential growth in hotel trading performance.