Australia Key Markets Hotel Market Outlook – Q1 2025

This report by Horwath HTL in Australia provides an outlook for ten key city markets across Australia, assessing performance to June 2025 and the outlook for future growth.

The data as published in the report is based on the economic forecast by Deloitte Access Economics for the June 2025 quarter, historical hotel performance from STR as of June 2025, as well as historical tourism data available as of March 2025, including forecasted domestic and international visitation from Tourism Research Australia (TRA) as at December 2024, which has been adjusted by Horwath HTL.

Domestic visitor nights, albeit only until YTD March 2025, recorded a decline year-on-year of 2.6%. However, we do note that TRA has adopted a new methodology in estimating domestic tourism volumes and as such the year-on-year comparison should be assessed with caution. TRA’s forecast of growth for domestic visitor nights in 2025 was for 1.6% growth.

Using data up until May 2025, international short-term visitor arrivals to Australia are well below the TRA forecast.  YTD May, short-term visitor arrivals to Australia have grown at a rate of 2.8% over the same period in 2024. This compares to a forecast of 11.1% for the full year. The pace of international tourism recovery continues to slow and a return to pre-Covid 2019 levels is set to take longer.

The outlook is positive across all 10 markets, though supply challenges remain in markets such as Melbourne, Adelaide and Hobart, which is resulting in a longer-than-expected return to pre-Covid occupancy levels. Sydney continues to cement it’s leading market position and status as Australia’s most desirable hotel market for investors.

Despite softer than forecast tourism data, only Canberra (ADR decline), Gold Coast and Sunshine Coast (occupancy declines due to Tropical Cyclone Alfred) have seen negative RevPAR growth YTD June 2025. Brisbane, Hobart, and Perth have all seen strong RevPAR growth, with Hobart’s growth driven primarily through improved occupancy, and Brisbane and Perth through continued strong ADR growth.

The RevPAR growth outlook out to year-end December 2029 has moderated slightly since Horwath HTL’s last report based on December 2024 data.  This is likely driven by a weaker outlook for both international and domestic tourism. Horwath HTL’s Econometric model has reduced the outlook for demand volumes with the outlook for occupancy growth slowing slightly across many markets.

Despite some strong ADR growth YTD, ADR growth is expected to continue to moderate across most markets over the next 5 years, though this growth is now being calculated off a higher base, so in absolute terms, the ADR outlook has improved. RevPAR growth moving forward for key economic centres is forecast to be driven by both occupancy and ADR, while ADR growth continues to be a prime driver of RevPAR growth for leisure-driven markets with seasonal constraints forecast to limit future occupancy growth.

Overall, the outlook for the Australian hotel market remains positive in the long term despite short-term risks linked to economic uncertainties and imbalances between supply and demand.

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