Australia’s hotel sector achieved record transaction volumes and strong performance metrics in 2025, driven by a surge in offshore investment and ongoing supply constraints, according to a new CBRE report.
Recovery rate by outbound travel destination
Record Performance and Investment in 2025
The Australian hotel industry reported its highest-ever transaction volumes in 2025, reaching $2.7 billion, according to CBRE’s Hotels Australia Overview and Outlook report. Offshore investors were responsible for 78% of total transaction activity, a significant increase from 27% in 2024. The majority of capital inflows came from Asia, including Singapore, Thailand, China, and Taiwan, while US-based investors accounted for 40% of major portfolio transactions.
CBRE’s Regional Director of Hotel Valuations, Troy Craig, stated that hotel operating performance has recovered to cycle highs. This recovery has been supported by diversified demand from international arrivals, domestic leisure, corporate travel, and major events. Sustained growth in Revenue Per Available Room (RevPAR) across major markets has led to renewed capital deployment, resulting in record transaction volumes.
Supply Constraints and Future Outlook
CBRE’s Head of Hotels Research, Ally Gibson, highlighted that the sector is entering a period of sustained undersupply. The report projects that hotel supply will be 41% below historic delivery levels for the remainder of the decade and about 35% below forecast demand growth. This undersupply is attributed to several factors, including increased construction costs, high land values, competition for alternative land uses, tighter financing conditions, and regulatory challenges.
With demand recovering and new supply limited, hotels are well-positioned to adjust room rates quickly in response to market changes. This dynamic allows hotels to convert increased demand into cash flow more rapidly than other property types, supporting income growth and feasibility recovery over the medium term.
Performance Metrics Exceed Pre-Pandemic Levels
The report found that both Average Daily Rate (ADR) and RevPAR have surpassed pre-pandemic levels nationwide, with occupancy rates nearing full recovery. Most major markets saw gains across all three performance indicators—occupancy, ADR, and RevPAR—with Sydney and Perth leading the way.
Brisbane showed particularly strong rate gains, reflecting tight supply and growing demand. Nationally, RevPAR grew by 6.7% year-on-year, with at least 8% annual growth in Sydney, Brisbane, Perth, Adelaide, Cairns, and Hobart. Despite ongoing supply pressures, Melbourne recorded 7% RevPAR growth. Brisbane, Perth, Cairns, and Darwin are the only markets to have exceeded pre-pandemic rates in all three key metrics.
Market Highlights: Sydney and Brisbane
Sydney maintained its position as Australia’s leading hotel market in 2025, recording the highest occupancy, ADR, and RevPAR nationwide. The city benefited from its status as a gateway destination, a diverse events calendar, and significant investment in projects. Sydney’s RevPAR increased by 9% year-on-year to a record $279, with occupancy averaging 83% and ADR reaching $334, up 5% from the previous year.
Brisbane also remained a strong performer, with ADR growth of 9% year-on-year, placing rates more than 67% above 2019 levels—the highest increase among major markets. Looking ahead, CBRE expects Brisbane’s occupancy to reach 78% by 2028, driven by constrained supply and improved mid-week demand. Occupancy is projected to exceed 80% in the lead-up to the 2032 Olympic Games.
Conclusion
The Australian hotel sector’s record performance in 2025 was underpinned by increased offshore investment and ongoing supply constraints. With demand expected to outpace supply for the remainder of the decade, the sector is positioned for continued strong performance, particularly in key markets such as Sydney and Brisbane.
