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Despite a modest rise in hotel room supply this year, construction delays pushing completions back to 2026 are expected to drive significant investment returns in the years to come, according to the latest industry research.
Colliers’ Australian Accommodation Supply Update has revealed that Australia’s hotel market added approximately 3,057 rooms in 2024 across the 10 major hotel markets, marking a 1.7 per cent increase from 2023.
Colliers highlighted research from hospitality sector analyst Smith Travel Research (STR) showing there were approximately 132,007 accommodation rooms in the 10 major markets of Australia at the end of December 2023.
By October 2024, the total number of hotel rooms had increased slightly to 132,957, with new CBD hotel openings balanced by some closures throughout the year, and changes in room supply ranging from a 4.9 per cent increase to a 0.4 per cent decline across various markets.
Colliers stated that new new hotel openings for the year have been “fairly spread” across the various markets, but were primarily concentrated in the Melbourne metro (681 rooms), followed by Adelaide (440 rooms), Sydney metro (381 rooms), Brisbane (370 rooms), Melbourne (329 rooms), Gold Coast (225 rooms) and Hobart (206 rooms).
Looking ahead, Colliers stated that a total of 7,724 rooms are currently under construction, with around 30 per cent of these located outside of the core CBD.
While the report’s findings showed that the completion time frame for rooms currently under construction are “skewed slightly towards 2026”, Colliers noted that ongoing challenges in the construction landscape could result in delays and push opening dates further out.
Although Colliers expects hotel openings to remain at a similar level over the next two years, the company’s head of hotel transactions Australia, Karen Wales, shared her belief that this will “signal the end of expansion, as supply reduces to a crawl”.
“Many proposed rooms have been shelved or openings pushed back to the medium term, although we doubt that all these projects will proceed given the escalation in hold costs,” said Wales.
Nevertheless, Wales shared that “growth over the next five years is expected to mirror the pre-pandemic period where hotel values in key markets saw a strong uptick”, which she emphasised “could result in superior returns for those early movers in the current cycle”.
“The numbers show a marked slowdown compared to prior years, providing a promising update to investors that new supply will not materialise over the investment horizon, giving them the opportunity to bid with confidence,” Wales said.
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