As tourism sector sees boom, hotels developers get cracking

Talis Sterns and David Simpson

Industry specialists Talis Sterns and David Simpson talk to The Indian Sun about what’s driving the new demand and how hotels are keeping up

The rapid rise of tourism to Australia, fuelled by the burgeoning middle class of China, seems to be driving a high demand for new hotels.

Talis Sterns, COO of Pomeroy Pacific, and David Simpson, lead partner—Hotels, Tourism and Leisure of Nem Australasia, a boutique consultancy that specialises in tourism talk to the Indian Sun about their outlook for the industry.

“What’s driving the high demand for new hotels,” says David, “is the lack of supply over the past decade across Sydney and Melbourne as well as a double digit growth of inbound tourists.” He adds that the fact that only 4% of China’s population holds a passport and the number is projected to be only 12% within 10 years is an indication of the opportunity that Australia has in front of if it. “The lack of supply to meet growing demand is exacerbated by the barriers to entry for new hotel development and the scarcity of the right sites,” says David.

Talis agrees that land and building costs are high and bankers have only recently become more comfortable financing hotel developments. “We are seeing large developers including resort companies undertaking mixed use developments of which the hotel assists in planning outcomes and makes the overall development more attractive to apartment buyers,” he says.

As to how a hotel makes a mixed-use development more attractive to investors, Talis says that the irony of mixed use developments is that the feasibility of the hotel component on its own “does not make sense”. “The developers strategy here is to have the prestige of a hotel brand to enhance the value of the rest of the development. Classic examples include the new Crown Resorts Towers coming up in Melbourne and Sydney. The six-star hotels in both have created huge interest in the apartment product at sales rates that will break records in both cities,” believes Talis, adding that the hotel component would have such a high cost per room to develop that would make it very challenging to extract a real return other tan through the halo effect.

According to David, the classic mistake for a developer to make is to decide the hotel brand for a location based on their own hotel experiences rather than address the fundamental market demand attributes of a location first.

As for the suburbs, it appears to be a growing market believe David and Talis. David says that new hotel projects are not just happening in the CBD or fringe but in the suburbs as well. “The suburbs are experiencing a lot of hotel planning activity too,” says David. He cites the example of Box Hill, which with its growing infrastructure, excellent public transport and good access to the Melbourne CBD, lends itself to hotel development. Asian Pacific Group’s new Art Series Hotel set to open this year is just one of the developments taking place. Another is a new Aloft hotel announced for development in South Yarra.

pomeroy 2

Space is in the design

Trends emerging in hotel designs and layouts

Talis says lobbies are turning into sharing and community spaces, unlike the large grand thoroughfares they were built as earlier. “Intelligent designs encourages guests to come down from their hotel room, spend money, and migle with other people,” says Talis.

The other trend that is emerging are cool bars and destination restaurants that are not necessarily operated by the hotel, says Talis. “Rooftop bars with stunning panoramic views can bring in both locals and tourists,” he adds.

According to David, boutique hotels are trending towards smaller and smarter hotel rooms. “No clumsy furniture, just pieces that fit well,” he says.


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