New Hotels Squeeze Room Rates
The Age
Wednesday December 18, 2002
Hotel operators are braced for tough times in Victoria as room supply rises an estimated 8.5 per cent by 2004 and overall demand and rates continue to slide.
Despite tight trading conditions throughout the year, four hotels have opened since May in the CBD and Southbank, and at least four are due to open in the next 12 months.
Research from Jones Lang LaSalle shows that developments due to come on to the market next year include two Pacific International hotels totalling 367 rooms, the 465-room Crown Promenade Hotel and the 135-room Ascot Serviced Apartments in Elizabeth Street.
Several projects are mooted for Southbank, the CBD, Clayton, and in coastal areas including Phillip Island and Portsea.
JLLS estimates that 1149 rooms are being built and will hit the market by 2004. At last count, no other east-coast market apart from Cairns had new rooms under construction.
Figures from the Australian Bureau of Statistics show that the extra supply, coupled with international unrest and uncertainty in the local business market, pulled Melbourne's rates down by 3.7 per cent in the June quarter compared with the same period last year. In that period, occupancy levels fell 4.4 per cent - by far the biggest fall of any state.
Although big operators such as Accor maintain that their prospects are healthy, the wider market is expected to suffer.
Accor managing director Michael Issenberg said: ``We have 14 hotels in greater Melbourne that range from the Sofitel to Formule 1 and we are holding up fairly well.
``That number of hotels allows us to do a lot of different things in the market cooperatively with some players," Mr Issenberg said. ``We are not unhappy with where we've gone but needless to say we are concerned about the future."
He said the chain had to offer discounts in the lead-up to Christmas, and it now viewed Melbourne as a trouble spot rather than one of its most secure markets.
JLLS Hotels senior vice-president Mark Durran said Melbourne's solid trading history was likely to save the day.
``Up until 2001, Melbourne exceeded expectations and absorbed continued supply increases in hotel and serviced apartment accommodation," Mr Durran said.
``Despite the continued development of hotels and serviced apartments in Melbourne, the city's medium to long-term prospects for hotel investment are solid. Melbourne benefits from a strong economy, and as a tourist destination with its multitude of special events and conventions."
BIS Shrapnel director Robert Mellor was also relatively upbeat.
Mr Mellor believed that the forecasts for tourism were robust enough to support the extra supply, and short-term pain would be replaced quickly with rates growth. ``I think we will have 12 to 18 months of a strengthening in demand and then you will see an improvement in room rates."
© 2002 The Age
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