Recent hotel industry data shows revenue in Australia increased as a whole during 2014/15. Yet with figures varying from city to city, there are both implications and opportunities for the academic sector in the coming year. In this paper, Campus Travel analyses the latest trends and what they mean for your organisation in 2016.
Hotel sales picking up across Australia
The latest Australian Hotel Market Update by CBRE Hotels shows the hotel industry increased its overall RevPAR (revenue per available room) by 3.4%, for the year to date in June 2015 compared with 2014.
RevPAR is calculated by dividing a hotel's total guestroom revenue by the room count and the number of days in the period being measured.
Hotels in the key business markets of Sydney, Melbourne and Canberra continued to perform strongly with revenue increases. During the first half of 2015, to the tourism hubs of Cairns, Gold Coast and Hobart also increased their RevPAR by a sizeable 10.2%, 8% and 5.2% respectively. With demand continuing to grow in these cities, hotels have been able to achieve the rates they want for their rooms. Based on the year’s solid performance, the 2016 rates in these cities are expected to push upwards.
In other Australian markets however, the cost implications are more positive for academic organisations procuring room nights.
In Adelaide, Brisbane, Darwin and Perth, factors such as a spike in supply over and above demand – coupled with a decline in the resources sector – saw RevPAR fall. To help spur stronger demand and revenue growth in 2016, we believe hoteliers could be more open to negotiation on rates in those cities.
Below we provide city summaries on key results such as revenue, Average Daily Rates (ADRs), occupancy levels and new hotel supply.
BRISBANE – KEY INDICATORS (year ending June 2015)
Average Daily Rate: $185.27
Occupancy Level: 76.1%
While Brisbane’s RevPAR for the year ending June 2015 rose marginally (0.1%) on 2014, its RevPAR fell by 5.6% for the first six months of this year, off the back of reduced activity and demand in the mining and government sectors. Anticipated increases in domestic and international visitor numbers are expected to drive demand growth in Brisbane, however, over-supply of hotel rooms will continue to push occupancy and RevPAR down in the medium term. Key properties recently opened, under construction and expected to proceed are summarised below.
SYDNEY – KEY INDICATORS (year ending June 2015)
Average Daily Rate: $204.15
Occupancy Level: 84.5%
Sydney continues to be a standout performer, with RevPAR growing by 6.9% for the six months to June 2015 and 4% for the 2014/15 financial year overall. Sydney also had the highest occupancy level in Australia, hitting 84.5% for the year ending June 2015. Striking the optimum balance between supply and demand, Sydney has achieved record high occupancy levels and ADRs. In the coming years, a number of properties are expected to undergo refurbishments and re-enter the market with high ADR levels. Room rates are likely to continue to at least grow in line with inflation, which will impact negatively on academic travel budgets.
CANBERRA/ACT – KEY INDICATORS (year ending June 2015)
Average Daily Rate: $162.22
Occupancy Level: 72.5%
Canberra was another strong performer, growing its RevPAR by 2% for the full financial year and a more significant 6.8% for the six months to June 2015. While recent new hotel supply in the market appears to have been sufficiently taken up, there’s uncertainty over whether the same can be said for the new properties currently under construction and slated for development.
MELBOURNE – KEY INDICATORS (year ending June 2015)
Average Daily Rate: $186.67
Occupancy Level: 81.7%
With its year-round calendar of major events, Melbourne’s RevPAR grew by 3.1% for 2014/15 overall. During the first six months of 2015, this figure increased to 3.8% with the influx of visitors attending key sporting events including the AFC Asian Cup and the Cricket World Cup. Additional supply of new hotel stock until 2017 may curb this growth rate over the next year or two. The annual rate increase in 2016 is expected to be modest and consistent with inflation, due to signs of a corporate sector that is watching its pennies.
ADELAIDE – KEY INDICATORS (year ending June 2015)
Average Daily Rate: $149.27
Occupancy Level: 77.6%
RevPAR in Adelaide suffered from an abundance of room supply, falling 4.6% in the first six months of 2015. While Adelaide generally benefits from the demand generated by a number of major annual events, additional supply coming into the market could potentially decrease occupancy levels. This may assist academic organisations looking for discounted rates in Adelaide. What transpires over the next few years in this city will depend to some extent on whether or not mooted hotel projects such as Sheraton and Sofitel actually proceed.
PERTH – KEY INDICATORS (year ending June 2015)
Average Daily Rate: $198.99
Occupancy Level: 82.5%
Perth’s RevPAR fell by 3.1% for the year ending June 2015 and 2.9% during the first six months of this year, reflecting the ongoing slowdown in the resource and mining sectors. Hoteliers in this market are currently promoting their reduced ADRs to help lift demand. Occupancy and ADR levels are expected to continue to fall in the short term, although the new Perth Stadium should help spur new demand when it opens in 2018. During the next few years Perth is expected to see significant growth in room numbers with a number of new projects in the pipeline.
DARWIN – KEY INDICATORS (year ending June 2015)
Average Daily Rate: $184.60
Occupancy Level: 69.4%
After a period of unprecedented growth, Darwin experienced the biggest RevPAR fall in Australia. The pullback in mining activity saw RevPAR in this city drop 12.7% in the six months to June 2015 and 9.1% for the 2014/15 year overall. This development, together with several proposed hotel projects set to come online between 2017 and 2019, will likely see hoteliers focus on maintaining their rates and occupancy in 2016.
NEW ZEALAND – KEY INDICATORS (year ending June 2015)
Average Daily Rate: NZ$148.67
Occupancy Level: 76.1%
New Zealand’s primary hotel markets of Auckland, Christchurch, Queenstown and Wellington powered during the year, particularly during the first half of 2015 when they recorded an average of 14.5% growth in RevPAR. Even Christchurch, still in recovery mode from the 2011 earthquake, achieved RevPAR growth of 9.1% for the 2014/15 year. New Zealand’s ADR for the year ending June 2015 set a new record, while RevPAR for the same period exceeded the levels achieved during the Rugby World Cup and is expected to see out the rest of 2015 on a high.
Strategies for 2016 rate negotiations
Campus Travel’s product managers constantly monitor rate trends in the key markets. We expect that those cities currently experiencing revenue growth – including Sydney, Melbourne and Canberra, as well as the more tourism focused cities of Cairns, Gold Coast and Hobart – will continue to increase their room rates while demand is strong, making it difficult to negotiate downwards on rates for the year ahead.
There is potential, however, to achieve more competitive rates for 2016 in cities where RevPAR is in decline – such as Adelaide, Brisbane Darwin and Perth.
In these cities in particular, or where you are booking multiple properties in different cities with the same hotel chain, Campus Travel will help you apply the following strategies to negotiate the best rates possible.
1. Make the most of Campus Travel's negotiated hotel rates
Campus Travel accesses four different channels to source accommodation rates. This means if book your hotel with us, you will also get the best rate, guaranteed!
Domestic Hotel Program: Gives you access to Campus Travel negotiated rates that are lower or equal to any other rate available including lowest rate available (LRA).
Client Specific Hotel Rates: We’ll expertly negotiate your hotel rates leveraging your accommodation volume and our strong relationships with suppliers.
Quickbeds.com: This is our own online accommodation website with exclusive corporate rates and a huge range of properties in Australia’s CBD and regional areas, and NZ!
Groups and conference accommodation: Our dedicated groups team has negotiated group rates for domestic and international hotels.
If you have an accommodation booking make sure you talk to a Campus Travel Consultant before you book. Our domestic hotel program has some of the lowest rates available from across the travel industry!
2. Strengthen your travel policy
If ad hoc travel bookings with many different suppliers are an issue within your organisation, it’s time to tighten up your policy and mandating. A compliant booking culture is a must if you want to achieve the best possible rates. Campus Travel can help you build a policy that suits the needs of your travellers while striking better deals and value from your preferred hotels. We can also help you put measures in place to mandate your policy, improve your compliance and reduce the risk of travel spend with non-preferred suppliers. The more effectively you can mandate, the greater opportunity you will have to keep your room rates capped.
3. Use technology to maximise compliance and visibility
Campus Travel provides online booking and reporting tools that give your organisation the best chance of reducing your total travel spend. Our user-friendly online booking tool allows your people to make fully compliant bookings while sourcing from the best available rates, including exclusive academic rates.
We also offer a reporting, analysis and benchmarking tool that gives you a clear picture of your spend by individual traveller, faculty or department, and with individual hotels and other travel suppliers. Our reporting shows you the volume you are booking with each supplier, which will assist in your next round of negotiations with preferred hotels. The more nights you can potentially book with a property, the more likelihood you will have of reducing your rate.
4. Book in advance
Booking hotels in advance gives you the inside running on availability and rates. As hotel rooms for any given night book up and occupancy levels rise, rates are more likely to increase for the remaining rooms. Booking early, where possible, will give you a better chance of locking in at lower rates.
5. Avoid major events where possible
Peak periods and major events tend to send hotel occupancy levels and room rates soaring. For example, Madonna’s March 2016 tour of Melbourne, Sydney and Brisbane is already seeing hotels at capacity in those cities. The same applies for sporting events such as The Australian Open in Melbourne. If your travellers need to attend conferences or study tours etc that clash with high profile events and peak seasons, focus on booking as early as possible. It’s not unusual for travellers to book hotels and flights a year or more in advance, so don’t delay!
Procure your 2016 hotels now
As we head into the final quarter of 2015, our product managers are meeting with hotels to renegotiate our 2016 rates. So now is the time to review your hotel rates with your Campus Travel Client Development Manager. The sooner you can start assessing your hotel program for 2016, the sooner we can negotiate with your preferred suppliers to give you greater savings and value. Campus Travel is here to assist you every step of the way.
For further information please contact your Campus Travel Account Manager, or call us on 1300 882 821