Serviced apartments are top performers in Australian hospitality sector

George Sell By George Sell
08 May 2014 | Updated 30 January 2017

Australia: Research from IBISWorld says that the serviced apartment sector has “been the strongest performer in the accommodation subdivision over the past decade”.

The report says other accommodation providers "have struggled in the wake of declining domestic tourism, a high Australian dollar and global economic uncertainty".

In the five years through 2013/14, IBISWorld expects industry revenue to increase by an annualised 3.1% to AUS$3 billion.

While the serviced apartment industry is strongly placed among accommodation service providers, the industry has battled a strong Australian dollar and cheap international airfares for much of the past five years. These factors are driving Australian tourists overseas at the expense of the domestic tourism market, meaning serviced apartment operators in Australia's traditional getaway destinations, such as the Gold Coast and Sunshine Coast in Queensland, are struggling. IBISWorld industry analyst Ryan Lin said: "Alleviating the dearth of domestic tourists has been growing demand from business travellers, which is contributing to high occupancy rates and growing room rates in Australia's capital cities."

In 2013-14, industry revenue growth is projected to be positive, with a fall in the strength of the Australian dollar and increasing number of inbound tourists and domestic tourism activity contributing to a 4.7% rise in revenue.

Over the next five years, the supply of new rooms is expected to keep pace with demand as investment remains strong. The report says serviced apartments are "the only feasible form of accommodation development in many areas and their flexible financing structure has contributed to the rapid growth in the number of serviced apartments over the past five years".

Lin added: "As Asian travellers continue to play their part in the Australian tourism market, serviced apartment operators need to find a way to gain a greater share of this market."

The industry has proven to be adaptable to consumer preferences in the past and should thrive on this challenge by increasing their provision of top-tier serviced apartments, says the report.

It also found that while there are many large chains that operate and manage a significant number of rooms through lease agreements, these operators earn comparatively less revenue than owner-operators. Owner-operators are typically independent establishments that earn more revenue than leased serviced apartment operators, who also tend to pay lease or franchise fees.

www.ibisworld.com.au

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