New flights to pour 1.9 million hotel room nights into the Australian market

Top hotels in Sydney and Melbourne are tipped to benefit from more visitors arriving.

The coming increase in new international flight routes will supercharge Australia’s hotel sector, potentially creating demand for up to 1.9 million extra room nights a year analysis has found.

More than 55 new flight routes, in addition to the existing 10,500 annual flights into Australian capital cities, will help drive the recovery of the hotel sector according to CBRE’s new research.

“Increased capacity from core markets including China, India, Southeast Asia, North America and the Middle East is expected to drive a continued recovery in international arrivals, reinforcing aviation’s role as a critical lever for tourism and hotel sector growth,” said CBRE’s head of hotels research Ally Gibson.

“As these new services mature and inbound visitation continues to recover, the uplift in demand is expected to increase occupancy and revenue per available rooms levels across key markets as Australia’s hotel development pipeline enters a sustained period of limited supply, driven by escalating construction costs and productivity constraints.”

CBRE’s report, From Runways to Room Nights, foreshadows that by the end of next year the new flights will add 1.9 million room nights to the market, lifting Australia’s hotel occupancy by an average of 3.4 per cent.

Based on an average 75 per cent load factor, CBRE assumes there will be an additional 2.2 million arrivals a year, principally from core markets such as China, India, Southeast Asia, North America and the Middle East. An estimated 800,000 of these travellers will stay in commercial accommodation.

Most of the growth in room nights will occur in Sydney given there will be 13 new flight routes that are projected to generate an expected 390,000 additional short-term arrivals, driving about 542,000 hotel room nights by the end of 2026. This translates into a 3 to 4 per cent increase in hotel occupancy.

Melbourne, which has sustained chronic oversupply of hotels, can expect an additional 409,000 room nights given there are 12 new international routes on offer, while Perth can predict gains of 4 per cent given an additional 339,000 room nights stemming from nine new direct services from the Middle East and Southeast Asia.

Eight new flight routes from North America and Asia are expected to generate an additional 267,000 room nights in Brisbane which is also expected to see a 4 per cent lift, while Cairns will see an extra 104,000 room nights.

Adelaide will benefit from an extra 102,000 room nights with four new international routes such as direct flights from San Francisco and Auckland. Adelaide’s occupancy is forecast to increase by 2 per cent supported by leisure and event-driven visitors.

The report notes that the Brisbane, Perth and Cairns hotel markets suffer from a lack of hotel supply and are particularly well positioned to benefit “with the new flight routes translating directly into performance upside”.

CBRE Hotel’s Troy Craig said new flight routes translated directly into performance upside for Brisbane, Perth and Cairns.

“Meanwhile, the gateway markets of Sydney and Melbourne, underpinned by strong corporate and leisure-based demand and major event schedules, are expected to sustain elevated levels of international arrivals and translate this into continued performance growth,” Mr Craig said.

CBRE’s analysis studied each route by airline, origin, frequency and aircraft type which it used to estimate new international short term arrivals and project them into room night demand and occupancy impacts.