Dransfield Hotel Futures 2019

Dransfield Hotel Futures are always worth a look with some interesting and sensible commentary related to Cairns and Port Douglas. There is a lot in there this year and much to come back to:

Conclusion
A moderate long term RevPAR outlook, slightly below inflation targets. The market will continue to be pinned to weather outcomes, with demand sentiment, particularly internationals hypersensitive to this. High quality new supply will generate interest and an exciting backdrop for visitors, including those who may not have chosen to holiday in Cairns previously
The Cairns and Port Douglas forecast represents a small downgrade to prior expectations, dragged by short term underperformance. Some of the gap is closed as development activity softens over the forecast period, albeit does not fully catch up • There is a large gap in performance metrics between large branded hotels and smaller independent stock in this market, with key indicators trading at considerably higher levels for branded stock who are typically members of the STR sample. This is likely to manifest in stronger rate growth as occupancy levels are constrained in high season, however will be offset by higher occupancy growth in the smaller independents as price elasticity comes into effect • Port Douglas hotels which typically outperform Cairns in terms of Rate whilst underperforming in occupancy, may feel some pressure from the new resort type stock coming into the Cairns market, competing for traditional luxury leisure guests • Over the period of the forecast, average occupancy levels of 75% are expected for this dataset which is 5 percentage points behind prior expectations. The reduction is a result of short term underperformance which carries through the life of the forecast. The occupancy position of the entire market, which includes a high number of smaller, unbranded and less regulated rooms sits approximately 10 points below this level
– Occupancy levels are forecast to fall 5 points in FY2019 as a combination of reduced wet season demand and new hotel rooms arriving in the low season
– Over the following two years to FY2021, we anticipate occupancy levels will largely stagnate in an environment of moderate supply arrivals
– Demand growth is expected to outstrip supply arrivals over the back half of the forecast with occupancy levels pushing above 76% in the latter years

Annual average rate growth of 2.6% is expected over the life of the forecast dragged by medium term underperformance
– Alternative destination opportunities tend to cap leisure market travellers capacity to increase price despite improved occupancy. This is more of an effect in Cairns as opposed to Port Douglas, although does limit the combined market from recording high rate growth in many instances • The arrival of new quality product may alleviate some of this historical effect in Cairns, however, perhaps existing market participants will discount to maintain occupancy • Our forecast is for a 3.5% decrease in average long-term real RevPAR compared to our previous forecast. The short term decrease, slowly catches up through the course of the forecast • RevPAR growth for the comparable period to FY2026 is inline with prior expectations, albeit from a lower base, and with a softer front end
– In FY2019 we expect 2.2% RevPAR decline as weather impacts demand – In the medium term to FY2021, average RevPAR growth of 0.7% p.a. is expected as moderate new supply enters
– Long-term expectations are for growth to accelerate over the back half of the forecast as new supply is absorbed and new development activity plateaus
– Full forecast expectations to FY2027 are for 2.6% growth p.a.

Apart from the conclusion there are aspects related to weather and tourism trends which relate to previous posts: Why does nobody look at this graph and the latest International Visitor Survey: International Visitor Survey shows TNQ continues to underperform

A bit hard to outperform when your key holiday sector is underperforming. Maybe someone should inform our tourism overlords because they don’t seem to know.

Previous Post: Hotel Futures 2019 Report; Source: Dransfield Hotels

 

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