Asian tourist influx set to boost hotel and resort profits

Hotels and resorts operate in a very competitive tourist accommodation market, with a variety of accommodation styles and quality available at a range of prices points to suit particular needs. Over the past five years, the industry has contended with weak global economic conditions and increased competition from the serviced apartments industry.

The hotels and resorts industry suffered large revenue declines in 2008-09 and 2009-10, when the global financial crisis wrought havoc on consumer sentiment and business confidence. For this reason, industry revenue is estimated to decline by an annualised 0.4% over the five years through 2012-13, to total $5.77 billion.

The hotels and resorts industry has responded well in the years since the financial crisis and has posted revenue gains in each of the past two years. Many hotel and resort operators reacted to the adverse economic conditions by cutting room rates and offering additional perks and services as part of packaged deals. While average takings per room remain low by historic standards, the industry’s occupancy rate has reached a historic high of 72%. On the back of the high occupancy rate, particularly in city markets, revenue is expected to increase by 1.6% in 2012-13.

In 2012-13, the industry is estimated to employ 66,800 people, down substantially over the past five years. The fall in employment numbers has been a result of hotel and resort operators seeking to cut costs in response to the global financial crisis. More employees have moved into part-time or casual positions as operators have sought to cut fixed costs. In the five years though 2012-13, the industry has slashed $36.1 million in wage costs.

Industry at a Glance

Domestic tourism has been weak over the past five years as Australians have taken advantage of cheap flights to Asia and a favourable exchange rate. Australians are spending 8.6% less on domestic holidays in 2012 than they did 10 years ago. However, the tourism slack has been picked up by international arrivals, especially from Asian countries like China. This has been the main contributor to the industry’s growth over the past decade.

The hotels and resorts industry is well positioned to take advantage of the tourism market’s paradigm shift towards more Asian travellers. Industry revenue is expected to increase by an annualised 1.8% over the next five years, to total $6.31 billion in 2017-18.

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