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Major CBD hotels under-performing

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Major CBD hotels under-performing
Major city hotels, particularly in Sydney and Melbourne, are significantly under-performing with occupancy rates up to 30 per cent below normal.

The CEO of peak body Accommodation Australia, Michael Johnson, told micenet the latest hotel occupancy figures for July and August revealed “occupancies are averaging in the 60s when at this time of year they should be in the 80s…perhaps this points to a new normal post-COVID”.

Melbourne CBD hotel occupancy during July was the second lowest capital city at 68.7 per cent, only slightly better than Adelaide at 65.2 per cent. 

Johnson cited a number of factors: the bubble of leisure guests travelling interstate seems to have levelled off; new concerns about escalating costs seem to be impacting some business travellers; and there are more Australians currently travelling internationally than international visitors arriving here.

The lack of international visitors is critical to cities like Melbourne that are still in a recovery phase, Johnson said. Spending by international visitors is still less than half what it was in 2019 – down $4.6 billion.

“We expect domestic demand to pick up between Q4 and Q1 next year, but we really need the international visitors, particularly China, to return to pre-COVID levels to fully recover,” said Johnson.

And while Melbourne’s calendar of major events, including the AFL Finals Series and the upcoming spring racing carnival should see a boost in hotel occupancies, Johnson said the threat of a bed tax by the Victorian Government – and echoed by some other regions as part of their housing policy – was a further disincentive for travellers who would ultimately bear the burden of this tax.

He noted that since COVID struck, Victoria had added 7,000 hotel rooms, 4,500 of them in the CBD, and, on top of this added supply impacting revenue, there was the bed tax threat.

Accommodation Australia has made representations to government at all levels that the proposed $5 levy on short term rentals and hotel accommodation was unfair and they should instead target the unregulated accommodation sector, “such as the Airbnbs of the world”.

“We have argued strongly that a $5 levy per bed night in Melbourne would not help the housing shortage, but would simply drive international visitors to other states. We received a good hearing at the ministerial level, and from recent conversations with government, I think we are starting to hear the rhetoric change,” Johnson said.

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