Australia's plans to combat and minimize risk from the COVID-19 pandemic have kept infection rates relatively low, but the cost to the tourism and hospitality industries has been great, amid closed international borders and state lockdowns.
There is some light at the end of a 19-month-long tunnel, however, as the country looks to a 2022 phased reopening of its borders, and lockdowns are lifting.
Sydney emerged from its 100-plus-day lockdown on Oct. 11, with hotels at last reopening their doors for non-essential travel.
Melbourne reopened on Oct. 22, while New Zealand’s principal city, Auckland, is due to reopen in November.
Most Australian states have been told they will remain closed even to domestic tourism until vaccination levels in the country hit the government’s target of between 70% and 80%.
Tourism Accommodation Australia CEO Michael Johnson said Greater Sydney hotel occupancies have plummeted to as low as 2% during the pandemic. Many hotels struggled to stay open, as business was “decimated,” he said.
“There were no leisure bookings, no international, no corporate,” he said, adding that thousands of staff have been without work, and the only hotels staying afloat were those used as quarantine facilities.
Overseas travel restarted for vaccinated Australians on Nov. 1, but the country is still off limits for inbound international tourists until early 2022, when a phased border reopening is planned.
International visitors, hotel nights and tourism spend have been down by as much as 98% through 2021, according to the Australian government Austrade’s Tourism Research Australia numbers.
Dave Baswal, managing director for Australia and New Zealand at Ovolo Hotels, said his first challenge is a full domestic relaunch.
“Now we have no restrictions in New South Wales, [although] other states are not open, we might hit 20% to 25% occupancy, with all business on Friday and Saturday with people coming into the [Central Business District] in the first few weeks. Already, for the week after reopening [occupancy is] up to 15%. Then it will be 35% early next month,” he said.
He said now that the Victoria state border is open — which allows for travel between Sydney and Melbourne, Australia’s two-largest cities — occupancy should be bolstered noticeably.
“And if December sees Queensland [state] open, we should be able to see 65% [occupancy] at a very good rate to match 2019, given we are a lifestyle brand. I expect the market to recover at that rate,” he said.
Hoteliers said fragmented borders and lockdown rules continue to cloud the outlook.
Ovolo has two hotels in each of Sydney, Melbourne, Canberra and Brisbane.
Baswal said he believes domestic demand can go a long way to filling rooms to pre-COVID-19 highs of 80% occupancy, but he predicts a long and patchy road to recovery.
“If all domestic borders are open, I expect our hotels to do 65% to 70%,” Baswal said of his hotels’ occupancy.
“Earlier in the year (between lockdowns), there was good spend happening. Once domestic is open fully, I think it’s quite sustainable in Australia for businesses to survive on their own,” he said.
Sydney and Melbourne Lead
Sydney hotels are a few paces ahead of other major Australian cities in the recovery, and Baswal said he’s proud New South Wales is taking the lead in reopening with a “punchy vaccination program.”
“Businesses need a path out, and I am glad NSW took that stance. Now Victoria, even Queensland are taking that approach,” he said of other states.
“I expect the next three months to be decisive in where and how quickly the recovery process actually happens. Other states will be able to learn from the Sydney experience,” he added.
He said big events and corporate business will probably take longer to recover, with the first significant rise in demand coming in February 2021.
“I think we’ll see three very common trends across the board in every city. First, [food and beverage] will bounce back much quicker as it’s very domestic, very local. Secondly, regional recovery will lead the way as people finally get to leave their apartments … so short punchy regional stays out of town, as the majority of the country lives in the cities,” he said.
“But I feel there will be a lot of demand for the cities, too, and lifestyle- and experience-driven products will see a really good recovery,” he added.
Not everyone feels the uptick will come so fast.
James Chappell, global business director at business advisory Horwath HTL, said “current forecasts suggest total revenue captured in the Sydney hotel market will recover to the 2019 level around the March 2023 quarter.”
For Melbourne, the scenario will be similar, given its similarly strong reliance on international and corporate markets, he said.
Chappell said revenue per available room is not expected to recover until after 2025 as a result of a large hotel pipeline, adding approximately 100 new hotels.
“A full rebound won’t come until foreign tourists return, with minimal travel restrictions,” Ovolo’s Baswal said.
“I do think that early next year we will start seeing plans for travel from high-vaccinated countries, with tests and short quarantine,” he added.
Get Creative
As with many other markets, the greatest challenge facing Australia's hoteliers is labor.
Accor’s Asia-Pacific CEO Simon McGrath said hotels need more government support to get through “tough times not created by the industry.”
He said occupancy at Accor’s 400 Australian hotels fell to 5% during the pandemic.
Until the end of the year when vaccination rates are projected to hit 80% nationwide and all state borders are reopened, he said the Australian government's furlough scheme, JobKeeper, should continue.
“We need to keep our employers engaged in the industry. We’re going to need them so that we have a buoyant strong industry as we do open up,” he said.
Social-distancing rules are an added challenge, with food and beverage outlets in Sydney running “almost half of the capacity,” Baswal said.
Despite the ongoing hardship, brand expansion and investment at Accor and other hotel firms continues. Business advisory Deloitte said there is a pipeline of approximately 32,000 new hotel rooms in Australia, with approximately 40% of them projected to open in 2022. Development is concentrated in Melbourne, Sydney and the Gold Coast.
Matthew Tripolone, managing director for Australasia and the Pacific region at IHG Hotels & Resorts, said the company's development plans include a push into regional hubs in Victoria by the Holiday Inn brand.
“We think the brand has huge potential. We currently have 17 hotels in various states of development in our pipeline, but we see a lot more opportunity. So that will be our focus, as well as our luxury and lifestyle brands,” he said.
Tripolone said COVID-19 might even unlock more opportunity given that Australians “continue to drive throughout the country,” rather than head offshore.
One thing all hotels in major cities need to ensure they do is to get creative, said
Deloitte’s Adele Labine-Romain, national travel, hospitality and services lead for Australia, said creativity will be key for hoteliers, at least until international travel returns to normal in 2023.
“They will need to look at ways to encourage a greater volume of domestic holidaymakers to fill the gap from business travelers,” she said.