Hotels staring into the abyss as cancellations outweigh new bookings - Jonathan Cartu Industrial & Residential Real Estate Firm
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Hotels staring into the abyss as cancellations outweigh new bookings

Hotels staring into the abyss as cancellations outweigh new bookings


Sydney and Melbourne hotel revenues are set to plummet over the coming months as booking cancellations surge following bans on travel and large gatherings and the axing of major events.

Data tracked by hotel analysts STR show revenue per available room (revPAR), the key industry metric of occupancy rate multiplied by average daily rate, fell by 15 per cent in Sydney and Melbourne last month compared with the February last year.

The downturn has intensified into this month, when the China travel ban was extended to Iran and South Korea (followed by Italy on March 10).

STR figures show that in the first week of this month, Sydney revPAR fell by 18 per cent year-on-year. Melbourne was down 20 per cent.

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In Sydney, the average price of a night’s accommodation has fallen from $252 a year ago to $220. Melbourne’s average daily rate is now $179, down from $197 a year ago.

STR Pacific regional manager Matthew Burke said the impact of COVID-19 was mostly being felt in Sydney and Melbourne, which are gateway cities for tourists visiting Australia, and Cairns on the Great Barrier Reef, which is heavily reliant on Asian tour groups.

“As the initial containment measures were international restrictions, these have had the greatest impact on international arrivals in the first instance,” Mr Burke told The Australian Financial Review.

“Secondly, February and March are peak months for conferences and meetings and cancellations or smaller delegate numbers had a direct impact.

“One such example is the Cisco Live Convention that was planned for Melbourne in the first week of March.”

But, he said, as additional containment measures had been implemented, the impact was beginning to be felt more widely based on the latest March data STR has seen.

A worrying leading indicator, Mr Burke said, was hotel “pick-up”, which tracks how much future occupancy was added compared to the week prior.

What the STR numbers show is that over the next 90 days in Sydney and Melbourne, average occupancy for properties deteriorates as cancellations outweigh new bookings.

Mr Burke said: “So future demand, based on the past seven days, has not only stopped, it has gone backwards.

“This window does take into consideration the announcement by the federal government of the additional social distancing and function size, which immediately had an impact on conventions and meetings.”

Indoor ban

On Wednesday, Prime Minister Scott Morrison banned indoor gatherings of 100 people or more, alongside an outdoor ban on gatherings of more than 500 that kicked off at the start of the week.

Virgin on Wednesday said it would suspend all international flights from March 30 until mid-June and cut domestic capacity by 50 per cent.

On Tuesday, Qantas said it would cut international capacity by 90 per cent and domestic capacity by 60 per cent from the end of this month until at least the end of May.

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Commercial Real Estate Jon Cartu

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