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Focus on North Queensland accommodation market
Written by Jude Bolger | DWS Consultant | jude@dws.net.au   
Thursday, 10 May 2012 10:42
Focus on North Queensland accommodation marketA number of factors have conspired to make tough trading conditions for the accommodation industry in North Queensland over recent years.
In particular, leisure destinations in North Queensland have felt the impact of a high Australian dollar value, disaster association and an oversupply of accommodation.
We take a look at the current conditions affecting the market in the North Queensland region and the relationship of supply and demand.
The following graph shows the occupancy and average room rate (adjusted for GST) for the Northern Queensland market derived from ABS Small Area Tourist Accommodation Data and is inclusive of the major leisure destinations of Cairns and Port Douglas.

Figure 1 – Northern Queensland Hotels, Motels & Serviced Apartments Occupancy & Average Room Rate

figure1-nthqld-hotels-motels--serviced-apartments-occupancy--avg-room-rate.png

  • The seasonality effects of the local market are apparent with peak months occurring from June to October and the quieter months occurring during the more humid periods experienced in northern Queensland.

  • March 2011 was a particularly depressed month with the combined factors of low season and the period following cyclone Yasi, which was a strong deterrent for leisure travellers given the widespread imagery in the media.

  • Overall, revenue management within the market was good and achieved average room rates (ARR) corresponded closely with changes in occupancy levels. Both occupancy and ARR peaked in July at 72.3% and $128 respectively but recorded 57% and $115 for the year.

To understand performance on the previous year, the following graph depicts monthly revenue per available room (RevPAR) for 2010 compared to 2011.

Figure 2 - Northern Queensland Hotels, Motels & Serviced Apartments RevPAR 2010 versus 2011

figure2-nth-qld-hotels-motels--serviced-apartments-revpar-2010-vs-2011.png

  • While there appears to be some improvement on the previous year, overall, RevPAR for 2010 averaged $64.80 and $66.26 in 2011. Once the effects of inflation are accounted for, there is little organic growth in the market.

  • The high value of the Australian dollar is a double edged sword for an Australian destination heavily reliant on leisure tourism as it is a barrier to entry for inbound international travellers and attractive for domestic travellers to holiday abroad.

The destinations of Cairns and Port Douglas have been experiencing poor performances for a number of years and anecdotal evidence suggests that the decline in performance has bottomed out. To understand the cyclical nature of supply and demand in Northern Queensland, the following graph presents a six year view of room supply and occupancy.

Figure 3 – Northern Queensland Room Supply versus Occupancy

figure3-nth-qld-room-supply-vs-occupancy.png

  • There were considerable additions to supply in the market from 2006 to 2007, with approximately 1,200 new bedrooms added. This was in response to historically good occupancy and average room rate levels, which drove construction activity and resulted in falls in occupancy levels.

  • The growth that had been experienced pre 2006 was not sustained following the addition of new supply and occupancy levels declined on an annual basis. The decline in occupancy appears to have stabilised in 2011 but is more as a result of a decline in supply as opposed to growth in roomnights. Evidence on the ground in Northern Queensland shows that a number of accommodation enterprises entered administration in 2010 and 2011 and is a main reason for the improvement in occupancy.

Notwithstanding this, data from Cairns airport shows that domestic inbound travellers has significantly increased over the past two years and is as a result of some diversification of the regional northern economy away from tourism to new sectors such as resources.

For the accommodation market in Northern Queensland to grow further, reliance on leisure tourism will need to be reduced within the local economy and diversification into other areas grown for exposure to the strong cyclical nature and leisure tourism risks to be reduced.

For any accommodation enquiries or for more information please contact our Accommodation Specialist Jude Bolger on (07) 3878 9355 or by email.

 
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