REPORT FROM AUSTRALIA—A domestic travel comeback after months of lockdowns and border closures due to COVID-19 means light at the end of a very dark tunnel for Australia’s hoteliers.
International borders slammed shut to travel in and out of the country in March, and remain so—possibly until late 2021, according to the government’s treasurer. But Australia’s travel outlook, like everywhere else in the world, depends on a vaccine, sources said.
The hard closure of borders between many of Australia’s eight states and territories has put a halt on national leisure and corporate tourism and devastated the hotel business.
“Our industry has experienced a downturn not seen since the Great Depression,” said Dean Long, CEO of the Accommodation Association of Australia.
Michael Johnson, CEO of Tourism Accommodation Australia, a division of the AAOA, said travel restrictions meant “(Central business district) hotels right around Australia basically came to a standstill.”
With the combined effect of “border closures, no international tourists and a lack of any corporate or major events,” performance across the country slumped to record low levels, Johnson said.
Major city markets were the worst-hit, Johnson said, with “hotels in cities like Sydney and Melbourne operating more than 70% down in room revenue compared to last year.”
Greater Sydney saw a 75% drop in year-over-year occupancy numbers, too, which Johnson said “have been well under 20% for months.”
Occupancy has even fallen to “zero” at times, said Marta Wheeldon, group revenue manager of View Hotels Group, which has hotels in Brisbane, Melbourne and Sydney.
As national occupancies slid to historic lows of 25% to 35% over the past few months, those in Sydney, Melbourne, Adelaide and Darwin nosedived to between 10% and 20%, down from the usual 70% to 80% in the case of Sydney and Melbourne, sources said.
Even with the lifting of local New South Wales travel restrictions over the summer, hotels in major metro markets were dealt a devastating blow, Wheeldon said.
“It’s been really very challenging, especially for hotels like us in capital cities, as everyone wanted to get out of town from 1 June and go regional,” she said.
This exacerbated a pre-pandemic glut of new rooms in Australia’s major state capitals.
“The reason why cities are struggling more than other areas is because of the oversupply in Sydney, Melbourne and Brisbane,” Wheeldon said.
Nowhere has this been more marked than in Sydney.
“We are missing out not only on international travelers but corporate,” Wheeldon said. “Corporate and events represent 60% of business, and it’s just not happening while people can’t travel interstate. Midweek, the hotels are just dead, empty.”
During a record economic slump in the country, tourism has been among the worst-hit sectors, with government statistics showing international visitors down as much as 99.6%—from 750,000 in August 2019 to 3,030 a year later.
Festive cheer
Australia’s hoteliers hope that most state borders will be open by Christmas. With the 23 November reopening of the border separating New South Wales and Victoria, Australia’s two largest states, Sydney has regained its position as lead tourism market, Johnson said.
“Jobs in our hard-hit sector will be created instantly once the demand returns ... and domestic tourists begin freely moving around the country again,” he said.
Already the signs of an uptick are here, Wheeldon said.
“October was getting up to 50% occupancy overall, so we’ve seen a huge improvement,” she said. “In Sydney, everything is driven by weekends … so we are seeing Saturday occupancies of 60%, 70%, 80%. But we can’t survive with just weekends. People are canceling events all the way through to August 2021, at least.”
Data from STR, the parent company of HNN, showed Sydney’s revenue per available room in Australian dollars slid by 70.7% in September, despite the continuing lifeline of government booking hotels as quarantine centers for the mandatory 14-day isolation for returning Australian travelers.
Regional return
While CBD hotels “remain crippled by the impact,” according to TAA’s Johnson, “regional NSW areas like the Blue Mountains or Hunter Valley are starting to experience larger tourist numbers.”
Matthew Burke, STR’s regional manager, Asia Pacific, said October 2020 data underlined this regional-led recovery.
“At the end of October, regional Australia was trading at 80% of the prior year. Conversely, capital cities have been stuck at 40% of last year’s demand levels, which illustrates Australians are venturing out of town,” Burke said.
Regional hoteliers confirmed this uplift.
Jordan Rodgers, GM at Byron at Byron, a Crystalbrook Collection Resort, a 92-suite luxury resort on the northern New South Wales coast, said travelers from within New South Wales are underpinning business.
“Since reopening on 1 September (after) a six-month refurbishment program, we have seen resort occupancy equivalent to high-season summer holidays,” he said. “With some other state borders still closed to Sydneysiders, regional NSW is experiencing substantial growth in visitation, thanks to travelers seeking new experiences within our own borders,” he added.
The upshot of that is surprising, Rodgers said.
“The current loss of international travelers is not noticeable in terms of numbers, with domestic leisure travelers more than making up for the drop in visitation from the northern hemisphere,” Rodgers said.
“Intrepid travelers, who might otherwise have traveled internationally,” are filling the gap, Rodgers said.
But it’s a different story in the state of Queensland, as sources said it relies heavily on both international and domestic visitors and is still largely cut off from both.
On 3 November, Queensland partially reopened to those living in New South Wales, but it remains shut off from millions of travelers from Greater Sydney and the state of Victoria.
Summer’s a-comin’
In the lead-up to the Southern Hemisphere summer holidays, hoteliers are anxious to see a change in lockdowns.
State tourism data showed occupancy had increased in October to an average 50.1% from a low of just above 10% in April but was down from October 2019’s 75%, while for the same period RevPAR fell from AU$138.78 ($103.03) to AU$81.67 ($60.63), a decline of more than 41%.
Melbourne has been hit the hardest by lockdowns, sources said, especially after a strict four-month lockdown.
STR data shows year-over-year September occupancy in the city of 4 million plunged by 64.6% to 26.9% in September, with RevPAR declining by almost 80% for the same period.
The easing of restrictions is coming just in time, said Stephen Ferguson, CEO of the Australian Hotels Association.
“The financial and emotional pressure on our hoteliers is huge, with the industry at breaking point,” he said.
While Melbourne has been “like a different country,” View Hotels’ Wheeldon said there have been some bright spots.
“We had to close, but a management agreement to lodge health workers kept occupancy ticking over. So we had a full hotel for two months … and it was the only reason we survived,” she said.
Now as Melbourne hoteliers wait for interstate travel to resume, hotel occupancy numbers are again “at less than 10%,” she added.
Due to the combined effect of bushfires and the pandemic, some Melbourne hotels have been open for less than three months in 2020, Long said.
All told, Melbourne’s hotel industry has a long road to recovery.
“We are seeing a lot of hotels start to reopen, but we’ll have to wait up to three months to see occupancies reach 30% to 40% in Melbourne,” Wheeldon said.
Full recovery across Australia will not be possible until overseas travel resumes, she said.
“Until then, most capital cities are unlikely to reach 50% to 60% occupancies again,” she added.